No one wants to drive away in a dream car only to find that he's heading
down a financial road with unwanted sacrifices waiting around every curve.
More than one consumer
has bought an expensive automobile or truck
and then found to his dismay that he couldn't afford to put gas in its tank.
The prudent consumer can avoid this pothole by reading and understanding
the fine print of automobile purchases, and weighing the benefits and drawbacks
of both purchasing and leasing a vehicle. Here are some issues for you to
- Do you have the money for the down payment that's required by a purchase? If so, you might want to buy.
- Do you generally prefer lower monthly payments? If so, you might want to lease.
- Do you like the idea of owning something of value after making payments for years? If so, you might want to buy.
- Do you like driving a new vehicle - particularly a luxury model - every two or three years? If so, you might want to lease.
- Do you want to trade in an old vehicle? If so, you might want to buy.
- Do you hate the hassle of selling your old car every time you want to buy a new one? If so, you might want to lease.
- Do you like the idea of carefully maintaining your car, so that it runs perfectly for years and years? If so, you might want to buy.
- Do you put "hard" miles on your vehicle? If so, you might want to lease.
- Do you eventually want to be free of car payments? If so, you might want to buy.
- Do you like the idea of driving a vehicle for a few years before purchasing it? If so, you might want to lease.
- Do you drive tens of thousands of miles each year? If so, you might want to buy instead of paying a relatively large amount of money at the lease's end for exceeding the annual mileage cap, which is generally 12,000 to 15,000 miles.
If you decide to lease, you need to learn exactly what you're paying for
in terms of interest rate
(it should be close to the current automobile
loan rate). You should negotiate the capitalized cost
(the price the
financial institution pays the dealer for the leased vehicle), the acquisition
(which the consumer is charged for initiating the lease) and the disposition
(which the consumer is charged at lease's end if he decides not
to buy the vehicle.). Because of all of these factors, professionals advise
that low monthly payments don't necessarily translate into a beneficial
transaction for the consumer.