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 Buy a New or Used Car or Lease it
Get the Best Deal to Save Money
Should You Buy a New or Used Car or Lease it
The Best Deal Will Save Money on Your Car
Should you lease or should you buy your car. What’s the best way? Your car lease is a contract that allows you to “rent” or “borrow” the car of your choice. The contract usually lasts three years during which you make monthly payments as agreed upon. The disadvantage of a lease comes at the end of the three-year period.
You have three options at the end of a lease. You can buy the car outright at a negotiated price, which is usually higher than the actual value of the car. You can walk away and find your next car somewhere else. Or you can lease another car. But if you always lease your cars, you are locking yourself into a lifetime of monthly payments. You will never get ahead of the game.
Should You Buy a New or Used Car or Lease it
The Hidden Costs of Leasing a Car
There are hidden costs when you lease a car. The trade-in price you agreed to pay when you leased your car, called the residual value, can be higher than the actual value of the car at the end of the lease. That’s how the leasing company is able to offer you lower monthly payments, because they’ll make it up on the trade-in price. You may be stuck paying a lump sum when you turn in your leased car.
If your leased car has a few dings and road wear when you turn it in at the end of the contract, the leasing company can charge you for wear and tear. And if you exceed your allotted mileage limit, you could pay an additional 15 cents a mile when you turn in the leased car.
Should You Buy a New or Used Car or Lease it
Save Money When You Buy a New or Used Car Outright
If you buy your next car outright, you will take out a loan for three, four or five years. When the loan is paid off, you own the car outright. You will be free of monthly payments. The smart move is to pay off the car, and own it and drive it for a long time. When your car loan is paid off, you’ll have $300 or more every month to save for other things. Then, when you are ready to sell it, the car you own brings you more cash.
A new car is not an investment. It depreciates about 20% in value the moment you drive it off the dealer’s lot. Maintaining a five-year-old car is a small expense compared to buying a new car. If you are well enough off financially to sink a lot of cash into a new car, if money is no object, if you can afford to pay for a new luxury vehicle to keep up appearances, more power to you. But those of us who watch our pennies will buy our next car, rather than lease it.
How to Buy a New or Used Car
Get the Best Car Deal and Save Money
If you are like most of us, you will take out a loan to buy your next car. In order to make comparison shopping easier, separate the financing decision from the car purchasing decision. Ask the dealer for the best cash price on the car, and compare that price among dealers. The price to ask for is the “out the door” price. This price will protect you for those hidden costs that mysteriously turn up on the bill of sale when the paperwork is done. You will negotiate down from the MSRP, the Manufacturer’s Suggested Retail Price, on the sticker. You will work from the dealer’s invoice price, what the dealer paid to get the car from the manufacturer.
However, the real cost to the dealer can be much lower than invoice price when manufacturer incentives are considered. There is often a manufacturer holdback of $1,000 or more, which the manufacturer will pay the dealer when the car is sold. With the holdback in mind, you can lower your offer more.
When You Buy a New or Used Carit
How to Finance Your Car Purchase
After you have your best offer, then shop for the financing. You will find that dealers won’t necessarily give you the best terms on the car loan. You are free to check out banks and credit unions and websites like lendingtree.com and eloan.com, which provide car loans.
Some dealers offer 0% financing as a special promotion. What they don’t tell you up front in the ads is that the 0% interest-free loan is available only to buyers with exemplary credit, possibly only those car buyers with a FICO credit score above 800 or more. The interest rate you will be offered depends on your FICO score, your credit rating. The interest rate on a car loan could be 5% if your FICO score is above 800, or it could go up to 14% or higher, if your FICO score is below 600.
Should You Buy a New or Used Car or Lease it
The Best Deal When You Buy a Car
Your best car buy is a used car, a few years old with low mileage. At this point, the depreciation of a car slows down, and your car buy will hold more of its value. How do you know that a used car is not a lemon? Check out the Certified Pre-Owned cars at the dealer. Be sure the manufacturer certifies the car, rather than the dealer. The warranty on the car should be backed by the manufacturer, too. Before you buy the used car, take it to an independent mechanic for an inspection. Check the Vehicle Identification Number in a national database like www.carfax.com. The report which costs $20 will tell you- If the car was in a wreck
- If it was used as a rental car
- If it was returned to the dealer as a lemon
- If the odometer has been set back
Should You Buy a New or Used Car or Lease it
How Car Insurance Affects Your Best Deal
Your car insurance is another cost factor to consider. Insurance is higher on a new car than a used car. Comprehensive insurance coverage adds substantially to the expense. Insurance is also much higher on cars that have a high likelihood of theft. You’ll find a list of these car models at www.iihs.org
I hope life brings you much success. I wish you a very happy day.
----- Surfer Sam
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