Buying vs. Leasing: Good and Not So Good Advantages of Each

There are two ways of acquiring a car. We are not going to discuss the chance of winning a contest or inheriting your uncle’s Corvette.

This is about the two most common ways. An individual may lease a car for a set term or the can purchase the car and make payments over a period of time.

With a lease car, other than oil changes, tires and the battery, pretty much everything is covered. When the leasing of cars first became popular, there was an extra bonus. Since most of the lease payment was interest, it could be deducted on by individuals on their annual tax return. The federal government soon put an end to that. Thus, the tax advantage is gone. You get the best car warranty when you lease it is something to keep in mind.

Leasing Companies Charge Fee For Returning Car

Also, some leasing companies charge you a fee when you bring the car in at the end of your lease. This amount can be $300, $400 or more. Read that fine print carefully because the company is making the consumer pay a fee for the purpose of returning the car. The fee does not cover any excess mileage on the car or excessive wear and tear. It is just another fee.

When purchasing a new car, you have to arrange financing. Most dealers are eager to do that, but if your credit rating is good, you might do better at your bank or credit union. Now, when you mention that you might go elsewhere for financing, the salesman and his manager may start offering some additional discounts or incentives. They may even throw in some extra time on the warranty. Examine the numbers very closely and, in fact, tell them you are going to take the numbers home and look at them in more detail.

Most dealers do not like that idea. They do not want you to leave the building without signing something. They may tell you they have another customer interested in the car, who does not happen to be in the building at the time. There may be some incentive that is going to expire at midnight. That is a real possibility. The people who sell the cars to the local dealers will offer extra incentives to the dealer for selling a given number of cars in a month. If the clock is ticking and you are the last man standing, ask about that possibility. It could save you some money, especially on a purchase. There seems to be less wiggle room a leased vehicle than a purchased vehicle.

The Value of The Trade-In

Now one point we have not covered is the trade in value of your existing car. You can check Kelly’s Blue Book or some other source and get a number. However, be aware that the value of your trade in goes up if you are looking at vehicle A and change your mind for and start eying the more expensive vehicle B, you can be assured the value of your trade will increase. The reverse can also take place. Start looking at a less expensive car, then the value of your trade-in will decrease. No one is saying there is anything wrong, it just one of those curious things that happen at the car dealer.

Also remember, after salesman convinces you that the car you are purchasing is one of the best on the road and the car you are driving is close to falling apart, you will still have to talk to the man who sells the warranties. That is a different story.

Buying or leasing a car is not something to do in a hurry. It would be good to shop around, but most people do not. So if you go to the dealer whom your Dad used to visit, that is all right. Just remember, Dad is not paying for the car this time.