Buying A Car: What’s it gonna cost You?
Perhaps a more appropriate question is: How do you feel about Car maintenance? The length of most leases on new vehicles coincides with the length of most car warranty periods. In most cases, you won’t be on the hook for anything other than normal wear-and-tear during the duration of your lease. Once your 24- or 36-month period is up, you turn in your car. Any issues that may arise during the rest of the car’s lifetime are someone else’s problem.
But when you own a car, you also own anything that goes wrong with it. That can mean big repair bills over time — especially as the car ages beyond its factory warranties. So while a paid-off car means you don’t have to shell out a few hundred bucks each month, a single four-figure repair job can erase those savings, fast.
But of course, owning has it’s benefits, especially when it’ all paid off. The great finance guru Dave Ramsey himself would tell you not to have a car payment… but what happens when ole reliable becomes ole questionable?
Leasing A Car: What’s in it For You?
Leasing a car is always a more affordable alternative to buying that car outright.
Here’s why.
Let’s say a new truck lists at $45,000. The manufacturer says the residual value for that truck after 3 years will be $35,000. If you were to lease that vehicle, you’d pay only on the difference between those two numbers. You’d be making payments on $10,000 — but driving around in a vehicle worth $45,000.
Manufacturers have an incentive to keep those residual values high. Why? Because they want their cars to have higher resale prices when this year’s models start coming back to car lots.
The result? A lessee pays even less for the new vehicle.
That’s a big reason why so many people who work at dealerships choose to lease: You pay less for a more valuable car.
That being said, there is a catch.
Once the lease ends, you have to start the process over again. Sure, you have the option to assume the remaining (residual) balance of the vehicle after the lease period and purchase it outright. But that is often a more expensive way to go compared to if you’d purchased the vehicle from the get go.
What most people do at the end of their leases is lease another vehicle — which isn’t necessarily a bad thing. You get another new car while making another lower-than-market-value payment. But some people aren’t comfortable with the lease/new lease cycle, which is why it’s important to assess your own preferences.
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