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Nov 7, 2014

Auto Buying Answers


With winter weather on the way, autumn is a common time for Wisconsinites to think about upgrading their vehicle. What make and model? New or used? Buy or lease? The car buying process means lots of questions. Read the article below, do some research and contact Bank of Luxemburg for information on our auto loans. We’ll help you get rolling!

Your Next Car: New or Used? Buy or Lease?

Worried that your clunker won't last another Wisconsin winter? Many people shop for new vehicles in the fall, hoping to get a great deal on outgoing models and last quarter sales.

For most consumers, buying a used car makes more financial sense than purchasing a new one. Used cars cost less, depreciate less, and have lower insurance premiums.

On the other hand, a new vehicle will be more reliable and present lower maintenance and repair costs. If you are financing your purchase, dealer zero-percent-interest and other incentives may make a new vehicle as affordable as a used one if you plan to keep it six years or longer.

When considering a new vehicle, consumers are often attracted by the lower monthly payments of leases. Leases, which typically run for three years, do have some advantages. In addition to lower monthly payments, they may offer lower maintenance costs, and the consumer can simply turn the car in at the end of the lease or buy it for a preset price. If you use a leased vehicle for your own business, the monthly payment sometimes can be deducted on your income tax return (check with your tax professional).

But a lease gives the consumer no equity in the vehicle, limits the number of miles driven (usually 12,000 or 15,000 per year) without penalty, and requires higher insurance premiums. A lease also prevents the consumer from customizing the car and may include added fees that increase the overall cost. Plus, if circumstances change and a consumer needs to end the lease before the contract ends, this can be costly. For most consumers, buying makes more financial sense than leasing.

Of course, other factors may trump financial ones - if the latest technology and amenities are important and you plan to upgrade every three years, a leased vehicle may make perfect sense. But if you commute long distances and could not reasonably limit your mileage, or have young children and pets and are concerned about wear and tear on a leased vehicle, buying may be your best option.

Whether you buy or lease a new or used vehicle, decide what you want before you enter a showroom. Focus on the total price, not just the monthly payment required. And be willing to walk away if the deal you are offered isn't what you want.

 Web resources worth checking out:

·      USAA on the best and worst times to buy a car.
·      Consumer Reports on buying vs. leasing. This site also offers many calculators to explore various options for your family.
·      Visit Edmunds.com for an analysis of buying a new or used Honda Accord vs. leasing one.
·      The Wisconsin Department of Financial Institutions offers a brochure on leasing, including the need for Gap insurance, to cover your costs if, in the event that your vehicle were totaled or stolen, the balance of your lease exceeded what you would receive from your insurance claim.
   
Source: Your Community Banker

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