buyingWe've Weighed the Pros and Cons of Leasing vs. Buying a Car
This Trick Will Get You a Better Price on Your Trade-In
This trick can keep some cash in your pocket.
When it comes time to get a new set of wheels, you have a lot of factors to consider as a consumer. A purchase of that magnitude can have a sizable impact on your finances, so it pays to weigh your options before making any big moves. The pros and cons of leasing vs buying a car can depend largely on your personal preferences and financial situation. People who like to slide into a new ride every couple of years regardless of the car's condition may make excellent candidates for leasing, while those who just want an affordable option to get from A to B might want to finance a vehicle instead.
"Leases aren't for everyone, and they're not cost-effective for every car," explains Grant Feek, co-founder and CEO of TRED. "That said, if you're the type of buyer who likes getting into new cars every 2–3 years, and/or if you're sensitive to monthly cash flow, and you like cars with relatively shallow depreciation curves, then leasing might be right for you."
The first question to ask yourself if you're deciding whether to buy or lease a car has little to do with the numbers
If you're deciding to lease or buy a car, focusing only on the monthly payment can be misleading.
Factors you should take into consideration before heading to the dealership include your personal driving style, financial health and goals going forward, the value and depreciation of the model you have in mind, and how much flexibility you're looking for. Let's break it down.
Look at your finances
When you lease a car, you're paying for the depreciation — or decrease in value due to wear and tear — that takes place over the life of your lease. For that reason, your monthly car payments on a lease may be lower than financing a vehicle. Feek explains that, if you lease a car with an upfront value of $20,000 for three years, and the car's residual value is $12,000, then you're only really paying that $8,000 difference rather than the full $20,000.
Leasing vs. Buying a Car: Which Is Right for You?
The answer is: it depends. Our financial experts' insight on whether leasing vs. buying is right for you, will help you make the best decision for you.
But those monthly payments aren't the only costs you have to worry about. When you lease a car, the company will often require more insurance than your state minimum. You'll also need to pay a down payment, generally 10–20 percent of the car's total cost. Leasing companies also require customers to have good credit to enter into the agreement; they want to know you're going to pay on your investment.
So if you carry a lot of debt, prefer to stick to bare-bones insurance, or want to own your car eventually, financing or purchasing one outright might be a better option for you.
Take repairs into account
If you lease a brand new vehicle, it will generally come under warranty. Because many car warranties last for three years, that policy will save you from paying for some repairs. Many dealerships will also throw in perks like oil changes and other maintenance to encourage customers to take good care of their cars. However, you may have to pay out for new tires, scratches and dings, and any damage the car acquires while it's under your care.
Used EVs are better in every way except one | An EV owner's journal
Depreciation can be your friend, if you understand how to harness it
When you own the car, you're responsible for all the repairs it might need. Older cars or those that get more use may need more regular maintenance, and those costs can add up. Those who decide to go that route will want to budget for that, especially if you spend less up front on a well-loved vehicle or one that comes with a few quirks.
Think about your travel plans
Many first-time car shoppers may not realize that leases come with mileage restrictions. In order to keep cars from depreciating too quickly, dealers will set a ceiling on how much you're allowed to drive it before incurring penalties. While that distance varies, it hovers around 12,000 miles per year for a standard lease. Going over that number could mean you get charged extra at a rate of about 15 cents a mile. That can really add up, if you take a few long road trips or drive the carpool consistently.
Consider your car personality
Your long-term car ownership goals really matter when deciding whether to lease or buy. If you plan to own your vehicle for more than three years, you may want to buy or finance a car instead of going through the hassle of the process again every few years. "Conversely, are you the type of person who likes getting into a new car every 2–3 years? If so, you might love leasing," Feek points out.
The One Incredible Perk of Buying Your Car Through Costco
No wonder so many people are doing it!
Some cars, like many SUVs or Subarus, tend to depreciate fairly slowly so they also come with lower monthly lease payments. Think the kind of cars you still see on the road a decade or more after they first hit the market. But flashy sports cars and some European models will depreciate more quickly, so those lease payments will be higher, too.
If you just have to have the latest and greatest, or you like to customize your ride, leasing may not fit your style. Breaking a lease early comes with steep penalties, so once you sign that paperwork, you're more or less locked in. And for those who want their car to reflect their individuality, buying one you can trick out to your heart's content might be a better bet.
Don't forget to negotiate
Just like bartering at a garage sale, there's often a little wiggle room on both leases and vehicle financing. But every effective negotiator does their homework first. Before you try to haggle either a sale or a lease, run the numbers. This easy calculator can help you figure out what your actual monthly payment will look like, on either choice. Then when you hit the bargaining table, know what you're asking for.
"Just like you can negotiate the price of a car when you purchase or finance, you can also negotiate the 'capitalized cost' when leasing a vehicle," Feek explains. "This is the starting value that your residual value will be subtracted from when calculating your monthly lease payment. Make sure to confirm that your capitalized cost equals a fair price to pay for the vehicle, regardless of how you choose to pay."
At the end of the day, it all comes down to what you value. Some people can't fathom paying into a depreciating asset, while others love getting a shiny new set of wheels every three years. Do your homework and make the decision that suits your lifestyle and your budget, to really drive away happy.
For can't-miss news, expert beauty advice, genius home solutions, delicious recipes, and lots more, sign up for the Good Housekeeping newsletter.
What to Know About Auto Lease Transfers.
Get out early, get in late.
Should a Business Owner Lease or Buy a Car? Weighing the Pros and Cons
In episode 164 of Financially Simple, Justin compares Leasing and Buying a car as a Small Business Owner. If you're planning on getting a new vehicle some ...
10 Mistakes Lots of People Make When Buying a New Car
According to statistics, most drivers change their car once every six years, which is a pretty long period of time. To take the best out of your car in those six years, ...
Wednesday, 21 august 2019
Our source says to expect a price hike on 2021 […]
Tuesday, 06 august 2019
CarInsurance.com's moving tool calculates the change in your premium for your new […]
Monday, 01 july 2019
2019 Family road trip report: Rising gas prices, jobs impact summer road […]
Wednesday, 11 september 2019
The promotion is currently running in the U.S., though it may send you to a dealer hundreds of miles away. © Motor1.com Hyundai Website Screenshot If you’re in the United States, have a bit of free time, and are interested in driving something with a Hyundai badge, you could get paid. The […]
Monday, 09 september 2019
No physical payment needed, just a […]
Wednesday, 04 september 2019
Though, there might be some bait-and-switch happening […]
Tuesday, 20 august 2019
The West and California in particular fare […]
Friday, 16 august 2019
Jaguar woos Tesla owners with $3,000 I-Pace EV discount originally appeared on Autoblog on Wed, 14 Aug 2019 Read More […]