Lease or Buy?
Fall is finally here in Atlanta. With it has come much desired and needed cooler temperatures. Believe it or not, stores already have Christmas decorations up. The list will be growing with the object of one’s desire for Christmas. Among things desired for some will be a shiny set of new wheels. Thus, November’s tip is regarding purchasing or leasing a new vehicle. I will present the pros and cons of each offer additional tips.
Whether to lease or buy a car is a matter of personal preference. Both options have advantages and disadvantages. I have always bought a car instead of leasing because I tend to drive my vehicles for at least eight to ten years. If you are a person who wants to ride in a new car every two to three years, or if you want to project that image, it makes more sense for you to lease. Below are other points to consider when deciding whether to lease or buy a car.
Points in favor of leasing:
Leasing often allows you to get into a new car with little or no money down.
Monthly payments are often lower when leasing.
Most, if not all, repairs are covered under the warranty when you lease typically for two or three years.
You get to drive a new car every twenty-four or thirty-six months.
Taxes are paid on the portion of the car that’s financed if you buy at the end of the lease.
Points against leasing:
Leasing is like paying rent. You never own the car.
A typical lease allows 12,000 miles annually.
Exceeding the allotted annual mileage can be very costly.
It can be expensive to terminate a lease prematurely if your driving needs change, so be sure you understand your lease contract.
Points in favor of buying:
Buying a car means you own it.
You’re earning equity with each payment.
In the long term, buying is more economical if you aren’t using the car for business purposes (in which case, there are no tax advantages).
When you buy a car, you can drive it as much as you like without worry of excess mileage penalties.
You aren’t held to a certain timeframe to change your car if your driving needs are altered or good opportunities arise unexpectedly.
Points against buying:
To have a reasonable monthly car payment, you may have to pay a larger down payment than you would leasing.
The monthly payment is likely higher.
If you aren’t going to “drive it to death” over many years, you may be concerned about the dramatic depreciation in value as soon as you drive the new car off the lot.
Additional Tips
Use free resources at your finger tip: TrueCar.com and KBB.com are excellent resources to give you a fairly accurate estimate of the car you desire whether it is new or used. I have used truecar.com for our most recent past purchases. I favor truecar.com because of the following reasons: it shows the factory invoice for new cars, the average paid in your area, and the MSRP.
Search regionally. Cars are priced to sell at what the market will bear in a given geographic area. I searched as far as Columbia,SC for the past two purchases of our vehicles. In 2012, I saved $4k off the asking price of the same Volvo I was trying to purchase in metro Atlanta by purchasing it in Columbia, S.C. This past April, we saved $1175 off the purchase price of my wife’s new Mazda by driving to Augusta.
Be patient and not be discouraged the first time the salesperson says he or she can’t sell at your price point. Keep looking and researching.