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July 23, 2020
Looking for your next car can be exciting! Before getting behind the wheel for a test drive, or even beginning your search, knowing the varying factors of purchasing one is helpful to keep in mind, as that can greatly influence your financial position.
When it's time to purchase your next vehicle, there are generally three options: buy used, buy new, or lease. Here are some pros and cons for each.
Used cars are generally less expensive up-front and they have the added benefit of not drastically depreciating when they leave the lot.
Buying a used car, offers a pretty good-sized savings percentage compared to purchasing that same car brand new. Therefore, it may be easier to afford a higher class of car than you normally could have.
Also, car insurance rates and registration renewals are typically lower for used cars. This can save you hundreds of dollars, or more, over the life of the car.
While today’s cars are much more efficient and can go longer between scheduled maintenance visits, if you choose to buy used, there are some additional costs to consider. For example, you’ll want to have the car checked out by a trusted mechanic to determine when maintenance work or repairs would be necessary.
You may have to pay additional money to have the car certified.
Depending on the age of the vehicle, you may possess it for less time, which means spending more on a another vehicle sooner.
Buying a new car may present you with more financing options from a seller, as well as new-car incentives such as cash rebates and great interest rates. You may also be able to spend less than the first-market price after negotiations, incentives and rebates.
New cars are also likely to provide the latest in tech features for performance, safety and comfort.
A brand new car offers peace of mind without the need to take it to a mechanic before buying. If issues arise, most warranties will cover the cost of repairs for the first few years.
New cars are expensive and you may have to put a large amount down up front. They also depreciate as soon as you leave the lot. In some cases, the value of the car drops as much as 20 percent right when you pull away! That means a $25,000 car will lose $5,000 within the first few minutes of ownership.
When you lease, you don’t pay the full purchase price of the car, rather, you pay the depreciation of the car. This means if you lease a $25,000 car for 3 years, and the anticipated value of the car at the end of the 3 years is $15,000, you only make payments on that $10,000 difference. If you had purchased the car, you would make payments on $25,000.
Leasing is also often available with no money down or a much smaller amount than when buying the car outright.
A major benefit of leasing is that you get to drive a brand new car every few years. This means the latest in safety and technology.
A drawback of leasing, is that the money you're spending isn’t investing in an asset, it’s simply spending money. Like renting instead of buying, you are not purchasing any equity in an asset you can later sell.
Other considerations are mileage fees and potential damage to the vehicle. If the car is damaged or you drive it over the mileage limit, you may end up with hefty fees.
Leasing often costs more than buying in the long run, as you typically drive a purchased car for longer than 3 years.
When buying your next car, consider the various financial choices, your driving habits, and your personal preferences of owning a car. Before deciding, visit our Car Loan page to learn how we can help you get on the road with a car that's right for you. Start the application process below.
If you’re not ready to apply for a car loan, and have questions, we are here to help. Call 315-735-8571 to talk about your options or make an appointment with one of our friendly and knowledgeable representatives today. Simply click on the button below, select the “Apply for a Loan” service from the menu and choose the “Auto/Recreational” option.
Article adapted from Banzai.
Posted in: Car Loan
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