With the economy as it is today, people are looking for more imaginative ways to afford a vehicle. Buying new is of course an undeniable pleasure, knowing that you are the first driver, warranties, and of course that new car smell. However, we are told that new cars lose close to 40 of their value within three years after the purchase. When you buy a used car, the previous owner absorbed this initial cost in the depreciation cycle, thus most of the cost in owning and operating the car is reduced. Other benefits to buying used are:
no sales tax, lower depreciation, lower financing costs, lower registration and licensing fees and lower insurance premiums. There are still downsides to buying used which you must also keep in mind. Unwarrantied repairs are very costly, there is a chance for lack of reliability, a maintenance costs are much higher, ie: replacing the tires, battery, brakes etc.
Leasing a new car vs. a used car is another question we ask ourselves. It is always best to check out the financials on both but personally I believe that we all have arrogance when buying or leasing any car. Some people only look at the financial aspect, while others are willing to pay more for a class appropriate, fancy looking car.
For the purpose of this article we will look at these three options:
Owning a new car
Up until the decline of the economy, purchasing a new car was most preferred. However with today’s standards the cost of a new car far exceeds the income of most people. This lead to higher loan interest and cars were financed for 2 or 3 years paid off and then traded up. Now a days new car loans are longer, as long as 5 or 6 years in order to keep the monthly payment lower, but longer loans means a higher interest rate. Car expenses are reflected in the length you own the car. After 3 years the expense and interest drops 30 .
Leasing a new car
With the cost of new vehicles rising, leasing has become a much more viable alternative. It has several advantages over the purchase of a car such as low or no down payment, lower monthly payments and lower sales tax. This is a popular choice because of these points, but it also important to remember that leases expire. Most leases have a 3 4 year contract, after which a new contract is required. This is costly because you will have to pay again for drive off fees and lease payments go up. Also, DMV taxes and insurance payments rise within the first year, something that must be considered when leasing.
Buying a used car:
Given that you bought a good reliable car from a reputable dealership, the first year expenses are significantly lower. After the car has been paid in full, expenses level off. However, increase to maintenance and repairs increases exponentially each year. As you can expect, keeping your used car well maintained can be the difference in savings. Insurance premiums are lower for a used car especially if you choose to wave the collision and theft coverage.
Whether buying or leasing a new car or buying a used car research of the product and its value is the most important factor. Do your homework; check the financials i.e. the length of the lease of loan, plus the interest. Understand the conditions and terms of leasing and always get a mechanic to check the mechanics of any used car. These simple rules can save you many frustrations in the years to come.
Author Resource:
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