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Money Girl
090 MG Your Next Car--Buy or Lease? (Part 2)
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In this episode, I'll discuss specific pros and cons to help you decide what's best for you. Even though the decision to buy or lease has definite financial implications, it's not the only factor to take into consideration. Your personal taste and lifestyle also plays a big part in the decision. What's right for one person can be totally wrong for another. Someone who's a fan of leasing might argue the following advantages. I want lower and more affordable monthly payments. I want a brand new vehicle every few years and I don't want the hassle of having to worry about trade-in values or haggling with buyers. I want to drive the latest models with the best safety and comfort features. I want to drive a car that's in great condition without worrying that a major repair will be needed in the future. Most potential repairs will be covered if I get a lease term that lasts just as long as the manufacturer's warranty. I drive a predictable number of miles each month and can return the car at the end of the lease period with minimal wear and tear. I have a stable career and income to make the monthly lease payments. I would never need to terminate a lease early. I'm willing to pay more in the long run to have all the benefits of leasing. On the other hand, a fan of buying could argue these points. I don't mind making higher monthly payments because I'm saving money in the long run. I like knowing that each payment allows me to build up equity for the future when I decide to sell the car or trade it in. I want to pay off my car and drive it debt-free while I save or invest the equivalent of my old loan payment. Plus, the longer I can drive it, the less it really costs me. I need to drive as many miles as I want and to use my car or truck without worrying about keeping it in perfect condition. I like to customize my car with accessories and flashy paint jobs. I'm willing to take the risk that major repairs could be needed after the warranty expires. I'm convinced that buying two to three-year-old used vehicles is the most economical option. This is because I get to take advantage of a large depreciation discount. I have an unstable career or may need to relocate out of the country to end a lease early would mean getting stuck with the total payoff in addition to early termination charges. So what do you think? Are you a leaser or a buyer? Is long-term cost savings on a new or used vehicle your primary objective? Then it will usually be best to buy and drive a vehicle until, as they say, the wheels fall off or drive it at least until the repair costs begin to exceed the cost of replacing it. This is the best way to save money in the long run unless you have a really great investment plan for the money you could save by leasing. September is a great month for planning. 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Go to policygenius.com or click the link in the description to get your free life insurance quotes and see how much you can save. That's policygenius.com. H5N1 bird flu is spreading in some animals. If you work with poultry, dairy cows, wild animals, or with raw, unpasteurized milk, wear protective gear, and take precautions. cdc.gov/birdflu, a message from CDC. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laughing me to this day. Not everyone gets B2B. But with LinkedIn, you'll be able to reach people who do. Get $100 credit on your next ad campaign. Go to LinkedIn.com/results to claim your credit. That's LinkedIn.com/results. Terms and conditions apply. LinkedIn, the place to be, to be. If you like the benefits of leasing, make sure you understand what those convenience will ultimately cost you. I'll include a link to a great lease versus buy calculator in the show notes at moneygirl.quickanddirtytips.com. You can use this tool to compare any lease deal with a similar purchase loan. After answering a few questions about the offers you're considering, the calculator will compare monthly payments and total costs of the deals. Isn't the internet wonderful? You'll want to get familiar with lease terminology and jargon in order to make the best deal possible. An important word to look for at the top of your lease is "closed end." This type of lease is also called a "walkaway lease" because you simply return the vehicle at the end of a lease term. Closed end leases are the most common type of consumer lease because you have no obligations other than potential charges for excess mileage or damage to the vehicle. Also, make sure that your lease includes gap coverage. This is common insurance for leases, but is rare for purchase loans. Gap coverage protects you if your vehicle is stolen or totaled, for example, and you owe more than it's worth. Gap coverage pays the difference when you're caught in this unfortunate situation of being "upside down" on the vehicle's value. And speaking of insurance, even with the lease, you're still responsible for keeping the vehicle fully insured. Some people mistakenly believe that the leasing company automatically provides insurance. You also have to pay for regular maintenance just as if you own the vehicle. Another consideration when leasing is what to do once the lease term expires. You may have the option to buy the vehicle at a price set in the lease. This might be a good idea if the vehicle is worth more than the agreed-upon purchase price, and obviously a bad idea if it's really worth less. Remember that the primary factor that determines the cost of an auto lease is the depreciation that's expected to happen during the term of the lease. Different makes and models of vehicles depreciate at very different rates, so the best lease deals can potentially be found for those models that have the lowest depreciation rates. I'll devote a future show to the specifics of auto leasing with tips for finding and negotiating the best deals. I'm glad you're listening and need to ask you a favor. If you enjoy the show, please take a moment to give back by nominating Money Girl for the 2008 People's Choice Podcast Awards. I would really appreciate your support for all the work that goes into each episode. Just go to podcastawards.com to vote. It will mean a lot to me. Cha-ching. That's all for now. Courtesy of Money Girl. Your guide to a richer life. H5N1 bird flu is spreading in poultry and cows. It's rare in people, but bird flu can make you sick. If you work with poultry, dairy cows, wild animals, or withdraw unpasteurized milk, wear protective gear like coveralls, NIOSH approved respirators, and eye protection, and wash your hands often. If you start feeling sick, seek medical care and tell them you work with animals. Learn how to reduce your risk at cdc.gov/birdflu. A message from CDC. With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn on what you want, like trying out that new workout class, and 2% cash rewards on what you need, like a foam roller for your sore muscles. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card. That's real life ready. Terms apply. Learn more at wellsfargo.com/activecash [BLANK_AUDIO]