We’ve all been there. Walking through the car dealership looking for a new car when it is time to replace or upgrade our vehicle. It can be a hard decision to update your old car – especially if you are attached to it. After all, you’ve driven to a lot of places and seen a lot of miles together. You might even have an affectionate name for your old car. We usually do!
Then the moment happens. The time comes when you need to trade in your car. It’s time to go car shopping, but what do you get next? Do you get a new car? How about a used vehicle? What kind of car do you want, and what will meet your needs? Do you lease a car or buy a car? Let’s talk about all of these things and more when it comes to buying a car.
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Your Car Purchase Options
Anyone shopping for a new car wants something they like with low mileage and the newest updated features. That is the whole purpose of upgrading vehicles right? Buying or leasing a new car can be a good option to get a vehicle you love whether it is a late model race red Ford Mustang GT, Ram 1500 pickup truck, or a Toyota Sienna. Let’s look at what you need to consider. When leasing a car, be aware of what you are getting into with a lease, and make sure you understand the associated lease fees and contract details. With buying a car, there are some things you need to know as the vehicle owner.
Leasing a Car
About Leasing a Car
The whole idea of leasing is that you do not actually own the vehicle. Sure, you pay the monthly lease fee to drive it and fill it up with gas, but you do not actually have any equity in the vehicle. When your vehicle’s lease is up, simply give it back to the dealership, pay a small fee, and you are ready to try something new. Easy as that!
When Leasing is Right
Leasing a vehicle can be right in certain situations. This includes when drivers want to avoid worrying about maintenance and try several vehicles over a shorter period of time (normally two to three years). They must also drive a limited number of miles per year, be careful not to put excessive wear and tear on their vehicle, and not care about creating equity value with their payments.
Maintaining Leased Vehicles
If you absolutely hate vehicle maintenance, leasing a car may be for you. Leased cars are usually newer vehicles and are still covered by things like the auto manufacturer’s bumper-to-bumper warranty. Also, oil changes and routine maintenance procedures are normally covered or included in the fees making maintenance a breeze.
The Limiting Factors of Leasing
There are some limitations to leasing a car. These are defined by the lease’s contract and normally include annual mileage limits under a number like 10,000 or 15,000 miles. Maintenance must also be performed by the dealership or a certified partner they approve. If additional wear and tear is found on the vehicle, you may have to pay additional fees.
Financial Leasing Pitfalls
While leasing may seem like a sweet deal, there are also some financial disadvantages to keep in mind. Again if you damage, crash, or total the vehicle, it is not your car and you are liable. This can include paying repair costs to fix or restore the vehicle. If you crash the car and cannot drive it, your car insurance may help cover the repair costs, but you still have to pay your lease payments.
Associated Leasing Costs and Fees
When you sign the lease, you will need to pay the lease acquisition fees, admin costs, and other fees to begin driving the vehicle. There are also lease disposition fees and closing costs when your lease ends. If you need to terminate your lease early, you guessed it – there’s also a fee for that as well. Remember that you do not have any equity in the vehicle, so the money paid for these costs as well as for the lease payments each month to drive the vehicle does not give you any equity in the vehicle.
Should You Lease a Car?
So, should you lease a car? Again, it depends. It could be helpful depending on your financial situation and/or a good way to burn money for the sake of convenience. There are arguably better options to drive away in the vehicle you want and which will meet your needs. Let’s talk about buying a car next.
Buying a Car
About Buying a New Car
Buying a car can be a better option than leasing a car depending on what you are looking for. This is because car ownership lets you finance a late model vehicle and build up equity in the vehicle over the course of your monthly payments. You can still get your dream, race red Ford Mustang GT or Ram 1500 pickup truck only now it’s yours to keep!
Checking Out New Cars
New cars are always flashy, shiny, and head-turners. Auto manufacturers update the look and feel of their models often to freshen up vehicle lines and increase the “WOW” factor. Getting into one of these new rides costs the most financially, but can be worth it in the form of factory warranties, having the newest technology, and driving the latest and greatest vehicle on the road.
The Value of a New Car
Talking about the value of a new car can be a contentious issue. We have probably all heard about how the value depreciates when you drive a brand new car off of the dealer lot. However, cars naturally lose value over time. This can be more or less pronounced with newer car models which are in high demand. You may even find the vehicle’s value can even go up over time if the supply is limited which increases your equity.
New Car Warranties
One of the best perks of being a new vehicle owner is the factory warranty that comes with the car. These types of warranties include the “bumper-to-bumper” warranty which includes the coverage of practically everything between the front and rear bumpers. These warranties provide similar benefits to having a leased vehicle and peace of mind if things go wrong.
The Technology of New Vehicles
Newer vehicles also have the newest and safest technology. Many times the newer base models are loaded with features like driving modes, cameras, and sensors which are not found on older, top-trim models. Technically the new car is a “worse” trim-level-wise, but the new car driving experience can be so much better thanks to the tech upgrades!
Dealership Financing Deals for New Cars
When you are thinking about buying a new car, check out dealership financing deals. You can usually find specific deals for lending and financing including perks like 0% APR for a specific amount of time, cashback offers that save you money, and 0% down payment benefits. All of these offers can help to save you money and get a better deal on a new car.
Should You Buy a New Car?
Getting one of the newest vehicle models on the market can be a tempting idea, but is it the best idea if you are on a car shopping budget? Probably not. Newer used cars are normally significantly better investments than brand new cars. This is because brand new cars can lose around 10% of their value, per Experian, as soon as they leave the lot.
About Buying a Used Car
Used cars are another viable contender when it comes to buying a car and becoming a vehicle owner. Granted the topic of used cars can span a HUGE spectrum of anything from a one-year-old recent model vehicle to a vintage automobile or classic car. For the purpose of our discussion here, we are talking about used cars which are newer than ten years old.
Used Car Values
Car buyers shopping with a budget in mind can typically find good deals in the used car market. There is a whole industry devoted to tracking what a fair price is for a used vehicle (depending on the condition). Take Kelly Blue Book for example. People can find the best used car prices for their area based on factors such as the vehicle’s options, mileage, and condition.
What to Look for When Buying a Used Car
There are a few things you want to keep in mind when buying a used car. First, pick a range of years and mileage. Newer can be better for additional features. For example, looking for a car that is between 3 to 7 years old with between 30,000 to 70,000 miles is often a good range. This provides a baseline to begin your search for a used vehicle.
Used Vehicle History
Check the vehicle’s condition and service history. Using a CarFax or similar document can help provide a service record of past maintenance along with when and where it was done. Keep the used car’s previous locations in mind. If it was driven in a snow-prone area, it may be more prone to rust or undercarriage corrosion from the mixture of salt and magnesium chloride used to treat ice on the roads. If the car was imported, the standard operating features may be different than domestic models.
Service Plans for Used Cars
If a used car is an older vehicle, the auto manufacturer’s warranty may have expired. The resulting gap may have some car owners worried about what happens if their vehicle has problems. Enter vehicle service contracts and plans! These service plans are similar to a warranty and can provide additional assistance if repairs are needed. They can also include things like roadside assistance.
Buying Returned Lease Vehicles
Now that we have covered both leases and used vehicles, did you know that you can buy a previously leased vehicle? These cars are normally offered for sale once the lease contract expires and it is returned to the dealership. They can make excellent used vehicles since they are relatively new and have had all of their required maintenance performed by the leasing company. They usually have between 40,000 and 60,000 miles on them.
Financing Your Car Purchase
Financing your vehicle is the next step. Ok, so you decided against leasing a car, found the perfect car you want to buy, and are ready to purchase it! What’s next? Financing your car gives you a loan from a lender you can use to buy your vehicle. You can finance through the dealership or your favorite local credit union or bank.
Car Shopping FAQs
Have questions about the right type of car to get? Learn about new, used, and leased vehicles.
Leased vehicles are owned by the car dealership. You pay them a monthly payment to use the vehicle and drive a limited number of miles every year.
Yes, you can often buy your leased vehicle when the lease is up. There may also be lease to own options as well through the dealership. You can also buy someone else's returned lease vehicle if the dealer offers it for sale. Lease returns can be great used vehicles to buy since all of the maintenance history was carefully tracked.