Comparing Car Costs: Buy New, Buy Used or Lease?
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Comparing Car Costs: Buy New, Buy Used or Lease?
Which auto financing method is cheapest over the long run? We compare the long-term costs of buying a new car, buying a used car, and leasing.
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The math says you forgot to mention that you likely paid (or managed to negotiate down) about a $3000 Cap Cost Reduction in your "due at signing" payment. That's what the mat says about your supplied numbers.
Once the owned vehicle loan has been paid off, the consumer has the option to remove expensive physical damage coverage from their vehicle that is required by finance companies. This reduced coverage would only apply in this example for the years after the loan has been paid off. The annual amount would vary greatly depending on the vehicle, driver characteristics, and driving history. $150 per year seems on the low end for comprehensive and collision coverage in RI.
I would be interested to know which companies (and in which states) people are charged a higher premium for leasing a vehicle compared to buying it.
**Not that it changes anything, but I just realized this article is two years old**
Furthermore, in this article, I offered other non-financial reasons to consider leasing over buying or buying a used car.
I wrote this article to reveal costs, not to state my opinion. I hope you will read it that way and learn from the information.
Philip Reed, Senior Consumer Advice Editor, Edmunds.com
Philip Reed, Edmunds.com Senior Consumer Advice Editor
For a 6-year cycle, we could save almost $10,000. That's an extra money the wife can spend on other stuffs.
This makes a huge difference and at the end of the period of a loan vs lease, the money not invested in the car but invested in the SandP 500 has appreciated dramatically, off-setting the entire cost of leasing a car (using historical rates of return, not selecting for best or worst or most recent periods).
This is a key flaw with every lease vs buy analysis I see online. In the real world of family budgets, the money you don't spend on a monthly payment goes somewhere. If it goes to dining out and bars, etc, then there is no net gain and the purchase is better than the lease. But if the savings go to another investment, which to me is the only sensible way to account for the differences, then leasing is far less expensive.
I drive an Outback. Current lease rate is 269 before taxes. They are offering an interest free loan to purchase. At 3 years that's 720 per month. At the end of the 3 year period Kelly blue book says the car is worth roughly 19,000. The difference between the 720 purchase payment and 269 lease payment is 451. I put the 451 in my 401k and it's actually 563 before taxes, let it grow at 5-7% per year. At the end of 3 years I'm net ahead.
Of course I have to emphasize this only works if you view the 720 payment as money available for investment, and this only works if the difference between the lease and purchase goes directly to your retirement account.
What do you think?
I am trying to get a new car. I am in love with the new chevrolet Impala. it cost more than i have. I am whiling to either lease it or buy it but i do not have any idea on what would be the best choice.
it cost, according to www.chevrolet.com, $32,885 and I only have 16.000
I need help please!
Leasing only makes sense if you are someone who likes to get a new car every so often. Clearly, leasing is more expensive over time, but to some people who have more disposable income, leasing is worth the extra long-term cost.
Now say the buyer buys this same vehicle used, perhaps at $8,000. In five years, the buyer has paid $8000 plus interest. Interest on a used vehicle is usually higher than on a new vehicle. After, five years the vehicle is worth say $1,000 wholesale. That means the buyer is out $7,000. Of course, with a used car the buyer pays far more in maintenance and repairs. It is not unreasonable to assume those costs could be $2,000 more than the new car buyer would pay. The used car buyer has paid a total of $9,000.
Finally, the new car buyer after five years has a vehicle that should last far longer the the used vehicle will last. Therefore, the used car buyer will now be required to purchase a replacement vehicle while the new car buyer still has time with the current vehicle.
There is no set rule as to whether new or used is most appropriate in all cases. Each buyer has unique goals and abilities. However, in the long run, the actual cost of new versus used is not always significant. All cars cost money to operate.
“The consumer mind-set has shifted in many ways; it’s been driven by this narrow focus on monthly payments, regardless of total cost,” said Jessica Caldwell, senior analyst at Edmunds. “That’s a perfect environment for leases, where auto dealers already try to keep customers’ attention on the monthly payment.”
The lease has offered a solution for many shoppers: a chance to drive home in a vehicle that has the latest technology, while still keeping that monthly payment within reach. And, the thinking goes, in three years, when it is time to return the car, the technology will have advanced so much that it will be time to upgrade. Owners can dump their suddenly obsolete infotainment system for the new version."
Auto Leasing Gains Popularity Among American Consumers (NY Times)
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2015 Subaru Outback 3.6R / 2024 Kia Sportage Hybrid SX Prestige
Even if you buy on time (as opposed to leasing), "More of your ready cash is tied up in a car, which depreciates in value."
Should You Lease or Buy Your Car?
The other way to save a lot on car expenses is to have fewer cars in your driveway.
Is there a typo in the number for money factor? Seems like it should be .00195 or 4.6%
I've bought and sold about half as many cars as the author, but certainly enough to understand the topic, and I have some pretty solid notions on what real costs are.
Leasing ALWAYS costs more, and if you drive a lot you'll like get stung pretty good. If you don't drive a lot then buying any car, new or used, makes WAY more sense.
You also didn't give an option for DIY maintenance, there are still a few around that can do that. I was probly the only new benzo owner than changed their own oil.
Some expensive models you simply don't want to own out of warranty. And extended warranties never make sense - too many loopholes and way too costly - better to just budget or have a savings account for those unexpected repairs.
And none of this dealt with car performance and reliability - better made cars in high demand are less costly to own due to depreciation and cost of maintaining them.
So I give it about a 7-8 out of 10 for completeness and accuracy - it's kind of the thousand-foot view of the whole thing without digging into the finer details.
Leasing is for more affluent buyers that can afford to put money into a car every month while they own it. Buying, new or used is for the more frugal consumers that can't afford to throw good money away. The biggest factor is that at the end of a lease, all you got was use of the car - you don't own it, in fact you don't own anything. You have an option to trade, sell, or buy it out, generally about half the vehicles value is still due. IT's a horrible way to actually BUY a car.
I get exactly 1/2 of what you have listed here. $14,941 instead of $29,882.
Can you elaborate on your question, please?
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2015 Subaru Outback 3.6R / 2024 Kia Sportage Hybrid SX Prestige