Money Watch Q & A: Buy or Lease a Car
We all know a new car depreciated in value as soon as you drive it off the lot, but is buying a vehicle still more cost effective than leasing? We found out in Wednesday night's Money Watch Q & A with Wayne Frediani of the Nevada Franchised Auto Dealers Association. Frediani says it all comes down to your lifestyle.
If you are willing to drive your car until the wheels fall off, purchasing a car outright might be the best option for you. Frediani says this option could save you money in the long term. Plus, in some cases, Frediani says, manufacturers provide extra rebates to customers looking to purchase a new car. Promotional financing can often include 0% interest.
On the other hand, Frediani says buying a car has some disadvantages – aside from depreciation. The monthly payments on purchased vehicles tend to be higher than a leased vehicle because the owner must compensate for the total cost of the car, including interest rates, taxes and other fees. For this reason, he says, some customers lease more expensive cars for the same cost as purchasing a new car.
Leasing a car, although more expensive over time, does have some distinct advantages, according to Frediani. He says monthly payments are typically lower than a purchased car, because you are paying for the depreciated value, as opposed to the total cost of the car. Most lease packages are between two and three years and if you would like to own the vehicle once your lease expires, you can exercise a purchase option.
There are a couple drawbacks to leasing, however. Lease terms include a fixed number of miles the customer can drive during the length of the lease. Typically, the amount ranges from 12,000 to 15,000 miles per year. If you go over your mileage, you will be fined.
Bottom line, for customers who do not drive as frequently, who would like lower monthly payments, who want to avoid owning a vehicle and who enjoy driving a new car every few years, leasing may be an ideal option.
For customers who prefer owning their own car, drive excessively, sell or trade-in vehicles and hope to save money in the long term - by owning a car outright – buying may be a better choice for you.
To learn more, contact the Nevada Franchised Auto Dealers Association at (775) 331-6884.
Written by Kristen Remington