Tips for car purchase - Lease Vs Puchase on a new car

There are several factors to consider before deciding whether to buy or rent a vehicle. The driving habits, buying habits, and manufacturer incentives and vehicle depreciation rates are the primary factors, but there are others.

- The driving habits -

This is the easiest qualification. Each car finance company, if the division of the manufacturer such as Ford Motor Credit, a specialty lender like Wells Fargo, or a bank or personal credit card, has multiple lease and purchase programs available.

Determine your habits, mileage, taking into account the travel plans account, the potential change in job or housing, and anything else that can make you drive more or less than you normally do. Once you have an idea of ​​how many miles you will probably be driving the entire length of the lease, find out if there are plans to match.

If there is a good chance that you will go more miles, the lease is not the best option. If you do not go beyond, go to the next factor. Drive 10k miles a year does not automatically hire the best option.

- Shopping habits -

Over 65% of Americans between 25-45 years of age change vehicles every 2-4 years. Financial companies know this, which is why most of the leases bid that fall into this range. Some go longer.

Leasing is the freedom and imprisonment at the same time. While allowing the consumer the opportunity to exit a vehicle in a mile down and no vehicle miles, stops even one person in the terms. Once you're inside, it is difficult and / or expensive to exit. Trading is difficult until a few months before the end of the term.

If you are sure you want to change cars every 2-3 years (and you lease "driving habits"), then the lease is potentially the best solution. If you keep your car for four years or more, which does not necessarily mean that you should not give up.

When GM started their SmartBuy program, it took a lot of heat from consumer advocacy groups because it was a lease that seemed a purchase. Terms such as "balloon payment" and "due at the end Lease" has become synonymous with "cheating".

In fact, this is a method of "buying" more range vehicle to pay a person normally dictate. For example, a recent promotion offered their luxury Lincoln MKZ for $ 0 down, $ 0 due at signing, $ 0 first payment, and $ 399 a month payments on a lease 39 months.

A standard loan of 72 months at a minimum of 2.9% on a vehicle of $ 35 000 would be more than $ 500 per month. If a consumer wants to buy the Lincoln MKZ in Tulsa and had great merit, but not like the high payments, could rent for 39 months. After the lease, you could fund balance and still be under $ 400 per month.

This is not the recommended way, but for those with "taste steak burger on a budget" is an option.

- Incentives manufacturer -

The vast majority of automotive lenders like to keep a mix of leases and purchases on the way. Too many leases cause the producer to lose more money when the vehicles are enforced because residual values ​​are normally higher than the actual cash value. In other words, what the manufacturer thought that a vehicle must be a value in 3 years (residual value) is generally higher than that actually lead to auctions of cars of the program (actual cash value).

Yet, they want a certain number of cars leased the road for several reasons. A long-term lease agreements bring the manufacturers and their dealers more money because the owner of higher fidelity, better chances of proper vehicle maintenance, and a better chance to sell more expensive, higher profit vehicles.

All this figures in a nice ebb and flow of the incentives offered. There will normally be incentives for both the financing and leasing a vehicle, but either way financial companies that consumers rely on for that period of time is the best option that will have the incentive. Look at both options and see which feels better.

- Rates of vehicles and debris -

Some are good vehicles for lease. Others are not. The two factors most important (and often more difficult to understand) are the rates and residuals.

The lower the speed, much less an owner will end up paying. Sounds simple, but when you compare different brands and models, a lower rate could also mean less waste. If this is the case, any savings achieved by a consumer rates are swept away by residual maturity.

The residual value equation in a lease is the amount that the finance company believes that the vehicle will be worth at the end of the lease if it is within the limit of miles, mechanically treated and intact. The higher is the residue, the lower the amount financed, and therefore, the low payments.

For example, if a vehicle $ 30 000 has a 50% residual for three years, the buyer is basically getting a loan month $ 15,000 / 36. If the residual for that vehicle was 40%, the purchaser to pay 60% in that period, so they would get a loan month $ 18,000 / 36.

It is sometimes difficult to follow the mathematics, but the concept is simple. The higher the residual, not a buyer will pay during the lease. Consumers who are real "tenants", which will be the passage of vehicles at the end of the period should seek higher residues. People who are leasing to get the payments down and plan on getting a loan for the balance at the end of the lease should not be too concerned about the waste, because if you are paying 60% now, 40% later or 50/50% now / later, are still paying for 100% of the car in the long run.

Vehicles for 2007 that have had the best residues in their category are:

Volkswagen Rabbit, Toyota Camry, Toyota Avalon, Pontiac Solstice, Lexus IS 250/350, BMW 6 Series, Honda Odyssey, Land Rover Range Rover Sport, Jeep Wrangler, Toyota 4Runner, Mercedes GL-Class, Toyota Tacoma, GMC Sierra / Chevrolet Silverado

Imports generally have higher residues than their national counterparts. Automotive Lease Guide lists the following as the best producers of leasing:

1 Honda

2 Toyota

3 Subaru

4 Volkswagen

- Final Thoughts -

A final appeal - for sale used. There are great sites where consumers can buy a car online, used car such as Baltimore, where a consumer can buy thousands of cars that match their criteria. Yet, if a customer wants new, you should get back.

Leasing and purchase each have advantages over the other. The best thing a consumer can do to decide is to look at the whole situation, ability to research, apply the previous ideas to the equation, and then choose what is best for their situation. Knowledge is a buyer (or landlord's) best friend.

I hope that helps .......