With interest rates so low, you may think it is a great time to buy or lease a car. You can get great deals on car loans, and the rates on car leases are amazing as well. Especially as we get into the summer holidays (July 4 and Labor Day), expect to see some great incentives from car dealers to get you shopping. However, buying or leasing a car is more than just writing a check – and here are some important things to consider.
The Financing
The first thing to consider is how you’re going to pay for the car. Are you going to pay cash (great!)? Otherwise, are you going to get a car loan or lease the car?
Both buying and leasing have their advantages, but there are a few things to consider with both. First is the monthly payment – can you afford it? Second, you need to consider the price you are paying and is it going to be worth it in a few years? Finally, you need to consider what extras you will have to pay for to get the loan or lease.
For example, many leases require gap insurance, which protects the lender should there be an accident and the value is less than the loan amount. You also need to consider any mileage limits or other restrictions on leasing the vehicle which could end up costing you more in the end.
The Maintenance
When buying or leasing a car, you’re not done when you drive off the lot. You also need to consider the costs of owning and maintaining the car. If you’re upgrading to a bigger car, you could face higher costs for fuel.
If you’re buying a more high-end luxury car, you’re probably going to have to pay more for routine repairs such as oil changes and brake service. Also, don’t be surprised if parts for your car cost more, since it is a luxury car. Finally, sportier cars tend to go through tires faster, and have more expensive tires to begin with.
Leasing is a horrible option in almost every instance. It is a bad deal in exchange for cheaper monthly lease payments. Between the balloon payment at the end if you want to buy, the down payment required, the low mileage you can drive every year, the strict wear and tear standards when returning the car, and other factors, leasing is a horrible option.
I’ve never understood why people would waste money leasing when they could just buy instead.
Leasing a car guarantees a car payment for life. I’ve spent most of my adult years without car payments by buying used. I’d suggest leaving leasing to businesses, where expenses are deductible.
I couldn’t agree more. 😀