Sunday, 14 September 2014

Don't Let Car Dealers Convince You To Lease

Some car dealers will tell you that leasing a vehicle is the best way to get an automobile. If someone you are working with says that, turn around and walk out the door because they are lying to your face. In fact, the exact opposite is true; leasing a vehicle is the most expensive way to drive.

When buying a vehicle, it is important to consider the total, paid-in-full price, rather than the monthly payments. When purchasing a brand new car with a loan, the interest builds up over time, eventually causing you to pay far more than the original price of the vehicle. Additionally, the age of the car leads to even further devaluation. Paying more on something while it is steady losing value is not a smart move, but at least at the end of the payments you actually own your vehicle.

Leasing is pretty much doing the same thing except at the end of your term, you turn the auto in and start all over with a different one. You are perpetually paying more for a vehicle than it is worth and you never actually get to own it. This is a very impractical financial plan.

Car dealers are often able to convince people that leases are the most practical option, so it is truly beneficial to look at the total cost when shopping. They generally have lower payments each month than a loan, enticing drivers to go for cars they normally could not afford.

But do not be fooled. Once you get on the car lease cycle it is difficult, and usually expensive, to get off. At the end of your term, you have to buy-out your vehicle from the lease in the form of a fee, and then you still have to pay off the residual value of the car. On the other hand, if you want to get out of your lease before the end of your term, you will have to pay a surrender charge and a "wear and tear" penalty. This second option also leaves you without a vehicle afterwards.

When you are looking to buy a new ride, be prepared to pay in full at the time of purchase. This will save you hundreds or thousands of dollars in interest compared to a loan. Plus, when you pay in full, smart car dealers will offer you a great price since they will not have to worry about you making payments. Buying used instead of new will also save you thousands, since you will miss the years in which vehicles depreciate the most. Again, if anyone recommends a lease, take your business elsewhere.