My parents bought a car and drove it until death. Toyota almost regrets building something that lasts that long. For a lot of us though, new models are irresistible for a number of reasons. Whether we want a new toy or a more reliable car for the family, a lot of us are in the market every few years.
New or used? Lease or buy? Most people look for a static answer, but it might shock you to learn that the real answers lies within. Each situation is different and only you can decide what the best financial decision is.
The only fact here is that general use cars of all sizes and shapes depreciate no matter how great resell value is with certain models. Equity is something that is continuously evaporating. The most important question is, how long are you going to use the vehicle?
Will the vehicle be used for many years? If so, buying a car is likely the best way to go. Buying a brand-new car is probably still a bad idea if there is a deal to be had on a car no more than a few years old. In recent years, manufacturers and their dealers have introduced “certified” programs for their vehicles, which offer warranty protection and new car financing in most cases. With a decent down payment, and if you keep the vehicle over a period of time beyond the term of the loan, the payment and overall return will be well worth it. Benefits of buying include are:
Ownership: Once the last payment is made, the car is yours. There are no more payments to make, thus no deadline for turning your lease in only to pick up another one. Drive it until the end of time if wanted.
Flexibility: No matter if it is the first day after purchase or ten years down the road, any amount of miles can be put on the vehicle. Many lease agreements limit 15,000 miles per year, or 12,000 on some. Anything more can be expensive.
Freedom: Ownership gives you the ability to maintain and customize your vehicle however you see fit. Do what you want with what is yours.
If you trade cars before you pay it off or shortly there after, chances are it is a bad investment. Leasing has been seen as an option for the rich or the wasteful, but there are reasons why a lease works for a lot of people. Some of the benefits include:
Lower payments: Because you are only purchasing the right to use a vehicle for a period of time, your financial responsibility and your monthly payments may be reduced significantly.
Safe driving: Because most leases last for 2-3 years, your vehicle generally provides warranty protection for as long as you drive it.*
Convenience: When a lease expires, you simply turn your vehicle in and pay off any remaining fees (such as for excess mileage), wear and tear, and taxes. If you'd rather not part with your Infiniti at lease-end, you can also take the opportunity to purchase it at a predetermined price. In either case, there's no need to take care of selling it or trading it in.
Once the decision has been made, make sure the payment and terms make sense. If you are buying, make sure to make a down payment. Cars depreciate, and if you don’t, you might find yourself owing more than the car is worth when it comes time to trade or sell. If you are leasing, make sure to read the fine print. Each manufacturer is different, and some hide fees that they will not be clear on up front.
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