I remember my first car, a 1969 Chevelle Malibu. It was blue with a black hardtop, three-speed on the column with vinyl bench seats – and a lot of problems under the hood. But I loved my “Blue Goose.” It was my first big purchase, my first “payment plan” to the Bank of Father, and my shout-out to the world that I was an adult.
No matter how many years or vehicles have passed since that first purchase, car buying remains a major decision. Once you have decided what type of car or truck will fit your personal needs, the question of buying new or used is confusing. And what about leasing a new car? The right answer is unique to the purchaser – there are pros and cons to new, used and lease options.
You might think that buying a used vehicle is cheaper than a new one – but that may not be true. Some automotive dealers offer seasonal or model clearance deals that are financed at a lower interest rate than their used counterparts, which can save buyers money in the total payout. Edmunds recently did a study comparing the costs of new and used vehicles. In some cases, the new car purchase was the better deal, as well as including a warranty and that new-car smell.
But if you are on a strict budget where monthly payments are the bottom line, a used car could fit your needs. You may also be able to buy a slightly used car with a few extra bells and whistles for less than the price of a no-frills new one. Recent certified pre-owned programs can offer a little peace of mind, and some used cars are still covered under the original factory warranty. Research the extras as well as any guarantees or paperwork – not all warranties are transferrable. Always insist on the right to have a vehicle inspected by a licensed mechanic of your choice before signing on any dotted lines. The cost of repairs could add dollars to the total cost.
Consider additional costs – taxes, licensing and insurance costs, for instance. Call your insurance company and ask for a quote on both new and used models. Find out requirements for a down payment – are you paying more up front for that used car in order to bring the payments within your budget?
If you like driving a new car for a few years before trading it in for the next best thing, then leasing might be the answer for you. Monthly payments on a three-year lease are usually cheaper, and often there is no down payment required. Most leased vehicles are still under warranty, and in some cases a lease can be easier to obtain than a loan on a new vehicle.
The downside? The car is not yours to sell or trade. Insurance costs might be higher due to a clause that would pay off the vehicle’s lease contract if the car is destroyed. You might be charged at the end of the lease term for added mileage and repairs – which could be significant. And if you want to turn in the car before the term is up – plan on paying additional fees.
Although many dealers or experts use the term “equity” to describe your initial down payment and monthly fees for buying a car, I would humbly disagree with that term, as it implies a car is an investment. A car is a tool. It depreciates in value as do computers and furniture. In the end, you will probably not turn a profit on the sale of your vehicle.
The “Blue Goose” met its demise long ago. I recently bought a truck after considering my own lifestyle, needs and budget. Whether you finance a new or used car or decide to lease your next vehicle, your choice is right for you.
Feature image by Alex Iby, unsplash.
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