Tony's Tips - Leasing vs. Buying Your Next Car |
With interest rates dropping, and leasing companies offering even lower monthly rates,
how do you determine which is best for you? Is it better to lease a car for three years with seemingly lower monthly payments and have nothing at the end? Or is it better to invest in the purchase of a vehicle with higher monthly payments, and have actually saved more at the end of three years? Only you can decide which choice is right for you and your budget.
Leasing a car is like renting an apartment. With an apartment, you make monthly payments and have no equity at the end of your lease no matter how many years you live in that house or apartment. When leasing a car, you also make monthly payments - usually for 24 - 36 months, and also have no ownership at the end of your lease. In addition, with your rented car you must decide immediately at lease-end whether or not you want to purchase that vehicle. When you invest in your own car, you can choose to keep it, sell it, or customize it whenever you want.
Advantages & Disadvantages of Leasing
Advantages:
- You have lower monthly payments, (but be sure to include the tax).
- You can change cars more frequently. Just return your car at the end of the lease and choose another.
- The car's warranty is for the time of lease.
- There are lower up-front costs. However, you will still need to invest at least $1,000 to cover first payment , security fee, bank fee, taxes & registration.
Disadvantages:
- Most insurance companies' premiums are highest on leased vehicles.
- You will have limited mileage, usually 12,000 or 15,000 per year, before additional fees are charged.
- You will be billed for any damage to the car either external or internal at the end of the lease.
- You won't be able to customize your car.
- Getting out of the lease early can be costly.
- You own nothing at the end of your lease.
Buying vs. Leasing: The Numbers Speak*
| Category |
Negotiated Purchase |
Advertised Lease |
Negtotiated Lease |
| MSRP(sticker price) |
$28,280 |
$28,230 |
$28,280 |
| Negotiated Price |
$25,220 |
$28,280 |
$25,420 |
| Down Payment |
$4,000 |
$2,000 |
0 |
| (tax included) |
|
|
|
| Drive-away cost |
$4,000 |
$4,027 |
$871 |
| (does not include title, |
|
|
|
| insurance, & reg. |
|
|
|
| Residual Value |
$19,230(est) |
$17,392 |
$17,392 |
| 36 monthly payments |
$725 |
$430 |
$421 |
| 3-year cost @ |
$30,105 |
$20,032 |
$15,490 |
| 15,000 miles/year |
|
|
|
| Owner equity |
$19,230 |
0 |
0 |
| Bottom Line - 3 years |
$10,875 |
$20,032 |
$15,490 |
*MotorTrend On-Line, Monday, February 4, 2002
Tips for Leasing:
- Be savvy about the advertised lease which includes the down-payment or "capitalized cost".
- You can negotiate this "capcost" which is the total-package cost or selling price of a car. Your monthly payments will be based on the difference between the estimated worth of the car at the end of the lease and this capitalized cost.
- Your drive-away cost will include other fees such as the security deposit, title, registration, banking fees, and first payment. There will also be taxes on that monthly rate.
- These are just the basics. The dealer is expert at this, so you need to educate yourself as much as possible. To understand what a reasonable price is go to InvestorGuide:University:Purchasing at http://www.investorguide.com.
For More Information About Leases
- Leasing a Motor Vehicle A Basic Guide," California Department of Consumer
- Affairs; write DCA Publications, P.O. Box 310, Sacramento, CA 95802
- Financenter (for a sample lease contract, what to ask, etc.) http://www.financenter.com.
- Intellichoice Inc. (for a comparison of manufacturer lease offers, lease primer and glossary) http://www.intellichoice.com.
Why should you refer your family and friends to Tony's Body Shop?
What we offer with every repair job:
- Guaranteed color match
- Accurate panel to panel alignment
- Repairing the vehicle to a safe condition
Your 100% satisfaction is our goal.
At Tony's Body Shop you can still find service, a smile, and a sincere thank you if you allow us to service your auto body needs.
Please feel free to call us if we can be of help or guide you in any way.
| This newsletter is brought to you by an independent who has to work harder to make your car repair decisions easier. |
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