I will never forget the first time I bought a vehicle. I was in search for the "perfect" car, and I hopped from dealership to dealership to find it. I spoke with dealers who were hungry to sell. They offered deals left and right. You can lease this car for only $190/month! Or, you can drive this new vehicle for ONLY $290 per month! Suddenly, I felt overwhelmed because I didn't realize how many decisions went into buying a vehicle!
Should I buy new? Or should I buy used? Or would I save money if I leased?
I didn't know what the right answer was, so I weighed the pros and cons of each, and went with what I thought would be the smartest financial choice.
Buying New: A new vehicle is an enormous investment, and comes with several perks: the new car smell, being the first owner, choosing the features you want, and the full factory warranty. But, new car payments can be costly. Then there is the registration, which will be more expensive with a new car. Make sure you are ready for the investment. If you're not sure, considering a late-model used cars is a good bet!
Buying Used: The used car market has changed drastically in the past few years, making used cars more appealing. Today's vehicles are made at a higher quality, meaning used cars are longer-lasting. You can find good deals on used cars at certified used-car programs, where newer-used cars are first inspected, and usually given a fresh, 12-month warranty. With a used vehicle, you are typically going to have lower monthly payments. Do your research on sites like Kelley Blue Book and Edmunds.com to see the value of used cars. Rule of thumb: Before buying any used vehicle, research the value of the vehicle and check the history report at Carfax.com or AutoCheck.com. Have the car inspected, take it for a test drive, and negotiate your best deal.
Leasing: Why do lease payments always seem so low on television ads? Well, because they are. When you lease, you are paying only for the estimated depreciation of the vehicle while you have it. To get a good deal, try your best to negotiate a lower capitalized cost (selling price), and a higher residual value (value of your car at the end of the term).
Leasing is a good option for people who like a new vehicle every two or three years. Manufacturer-subsidized leases are likely to be the cheapest available. But, leasing has some major drawbacks. At the end of the term, you are forced to make a huge financial decision -- do you buy or lease a new car, or do you purchase the vehicle you have leased for the lease-end price? (Typically, this value is set beforehand). Leasing can become costly if you surpass the negotiated mileage. There is a set pay-per mile charge if you travel above the mileage limit. Rule of thumb: Lease only if you want the car short-term, and if you won't surpass the mileage limit. That way, you can avoid costly down payments. If you think you might want your vehicle to last more than three years, consider buying instead.
After researching, and deciding what's best for you, research auto loan rates at your credit union! Get your best deal with your credit union!