Buying
- The main advantage of buying is “ultimate ownership” as well the ability to not worry about mileage
- How many miles do you drive on average per year? This is a top priority to consider (heavy commuters typically purchase)
- Buying allows consumers to finance the vehicle up to about 6 years with interest rates on average within 4% interest financing
- Certified preowned – great deal especially due to how rapid cars depreciate, typically are covered similar to a lease for 3 years of basic repairs and maintenance
- Demo/”test drivers” – also great deals from demo/loaner cars from the dealership to the consumer, usually can find great discounts even with low mileage
- Deciding how much to put down & finance:
- Consider overall cash flow & cash reserves – what is a comfortable monthly payment?
- Can pay 100% in cash if reserves & future expenses are planned for
- With low bank interest rates and mid auto loan rates – could be beneficial to use cash if applicable
- Pre-owned vehicles – typically need to put down at least 10%
- New vehicles – typically need to put down at least 20%
Leasing
- Majority of maintenance will be covered during the terms of the lease (typically 36 months), which leads to automatic savings
- Allows you to stay up to date on car technology if continuing to lease every couple of years
- Favors consumers that are strict to limiting annual mileage closer to either 7,500, 10,000, 12,000, & up to 15,000 miles per year and typically don’t intend to purchase vehicle post lease
- Can also lease if you need a car but are unsure if you will keep it for more than a couple of years
- Monthly payments for a lease are typically lower than for auto loan on a purchase
- Major con – consumer does not build equity in the vehicle & has to pay miscellaneous fees including acquisition & dealer fees
Couple of items for car consumers to consider:
- Average/projected annual mileage on new car
- Monthly amount comfortable to pay on a purchase or lease while maintaining healthy cash flow
- Negotiate the price of the car, not how much you are willing to pay per month
