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Should You Buy Or Lease Your Next Car?

Should You Buy or Lease Your Next Car?

Will you buy or lease your next set of wheels? Since there are enough financial calculators and break-even analyses out there to make your head spin, it’s important to take a breath when considering this question, and make sure your decision takes into account the “qualitative variables” as well as financial considerations. There are many questions you’ll want to answer–beyond just how long you plan to own the car, and how many miles you will put on it each year. For instance:

  • Are other cars in your family leased or owned?
  • What does your current cash flow look like?
  • How stable is your financial and personal future?
  • How well do you maintain your cars?

Addressing these questions may help with your decision-making process. Below are some examples of what you should consider while pondering these variables.

Other Vehicles: Deciding whether to buy or lease is far from a one-way road. In fact, employing a “buy one, lease one” strategy may help you accommodate the different personalities in your family. This does not necessarily mean keeping the old family wagon for one spouse and giving the other the new leased sports car. Instead, a strategy some couples have found beneficial is monitoring miles on the leased car and being sure to take their longest trips in the owned car. Why? Overage fees for driving beyond the maximum miles permitted under your lease can be as high as 25 cents per mile. So if you own at least one car, you should closely budget the miles allowed on the leased vehicle(s) based on your contract.

Cash Flow: Is it smart to pay the down payment and upfront sales tax on your new car now, based on your current finances? In addition to higher monthly costs for a loan, the immediate costs of purchasing a car outright are substantially higher than leasing. When you lease, many of the initial fees can be rolled into the monthly payment. Also, when you lease a car you essentially pay only the sales tax on the depreciation of the vehicle during the term. When you buy and finance a car, you’ll need to be prepared to make the down payment and sales tax on the entire price of the vehicle. A 10% down payment and 7% (New Jersey) tax on a $50,000 car is an immediate cash outlay of $8,500.

Stability: If you foresee a life-changing event in your near future that might require you to switch vehicles, don’t even think of leasing. Breaking lease contracts can be very expensive and should only be done as a last resort. It’s a common misconception that leasing is the answer for individuals who consistently desire the newest models of cars. However, that’s not quite accurate. When you lease, you’re signing a contract that you must stick with to completion. Make sure you’ll be comfortable with that car for the entire lease duration before signing the dotted line. One final consideration: Because most of a car’s depreciation takes place in the first few years of ownership, if you’re willing to accept a longer lease, you may be able to substantially reduce your monthly costs.

Car Maintenance: Most leased vehicles remain under warranty for the duration of the lease. This is great if your cars usually experience normal wear and tear. However, if you are on either of the extreme ends of the spectrum—either you are very hard on your car or you keep it in pristine condition–owning your vehicle is your better route. For example, will your 16-year-old son drive this car? If so, be sure to read about what damage is considered “excessive” when leasing a car (Sorry, but that’s the reality of having a teen driver in your family!). On the other hand, if you have a history of taking outstanding care of your cars, reap the rewards by owning your vehicle and taking advantage of its equity.

As you can see, the decision to buy or lease a car isn’t always simple. Take some time to consider your habits and personal preferences. When it comes to choosing a new car, there’s really no “one size fits all” answer.

Important Disclosure Information

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This presentation is not a substitute for personalized advice from RegentAtlantic.  This information is current only as of the date on which it was sent.  The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic.  Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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