Buying Versus Leasing a Car
There are big differences between buying and leasing. Typically, if you were to purchase a new car, you would make a down payment and finance the remaining cost. At the end of the term, the car would be yours. Leasing is essentially renting, with your payment going towards the car’s depreciation. If the lease includes a purchase option, you may buy it at the end of a specific time period.
So which is better? That depends on your individual situation and needs. You will have to decide for yourself by analyzing the advantages and disadvantages of each:
There are short-term cost advantages to leasing. The monthly payments on a leased car are usually far less than on a loan – even for a luxury model. The down payment usually works out to be less than what you would pay to purchase a car as well. Because the typical lease is for three years, most repairs are covered by factory warranty. Sales tax is cheaper too, as you only pay it on the financed portion.
An attractive feature of leasing is the ability to drive a new car every few years. You never have to go through the hassle of selling it; you just turn it in at the end of the term. While the payments are often reasonable, you don’t gain equity in the car.
Leases are also restrictive. If you exceed the yearly mileage limit you will be assessed an extra charge. You must take good care of the car as well, as any nicks or dings will be considered “wear and tear” and will cost you. At the end of the lease the best option may be to purchase your car which can be financed through Idaho Central Credit Union.
When you buy a car, it’s yours. You can customize it and drive it as much and far as you want, penalty-free. Rather than having infinite payments, buying means you will eventually pay the car off. And if you want to sell it you can do so at any time, as you are not locked into a contract. Still, when you buy a car it can be expensive. Monthly payments are usually more than a leased car, and once your warranty expires, you will be responsible for the maintenance costs. It is important to get the best financing you can so that you get the most car for your money.
Getting the best deal on automobile financing isn’t as easy as accepting the first offer you are presented with. Buyers should take time to research car features, compare pricing and understand available incentives from the dealer or auto manufacturer. The extra effort can save you thousands of dollars. Preferred lenders like Idaho Central Credit Union offer lower interest rates to members like you. If you are looking to purchase or refinance a vehicle we can help you find a loan with a monthly payment that works with your budget. Ask your local dealer for financing with Idaho Central or give us a call.
Check your credit report and make necessary improvements
Before you shop for a loan, first obtain your credit reports from each of the three major credit-reporting agencies (Experian, TransUnion, and Equifax). Dispute any erroneous information, pay old debts, reduce your unsecured balances, and close accounts you don’t need or use. Building up your credit enough to see an improvement in your credit score takes time, but it can make a tremendous difference in the deal you are offered.
Consider a co-signer – carefully
Shop for the best deal
The total amount you will pay for your car depends on its price, the annual percentage rate (APR), and the length of the loan. Shop around and compare offers. Rates at Idaho Central Credit Union are frequently better than what you would get at a bank, so you won’t have to worry about paying too much.
Dealer financing can be very competitive. If you choose to go with dealer financing (where the dealership shops for loans for you), be sure to ask about manufacturer’s incentives, reduced finance rates, cash back on specific car models and be sure to ask about a loan from Idaho Central Credit Union.
When financing, look for preferred lenders like ICCU. Idaho Central has the Credit Union advantage which allows us to offer lower interest rates to members. ICCU even offers a first-time auto buyer program to those with little to no credit. If you are looking to purchase or refinance a vehicle, ICCU can help you finance the right loan that fits your needs.
Four Potholes to Avoid in the Car-Buying Process
Tip: When you think about what you can afford for your monthly transportation expense, remember it’s not just the car payment. Auto insurance, gas, tolls, parking, repairs and maintenance can be real budget busters if you haven’t planned for them.
Tip: The percentage of your available credit limit you use makes up 30% of your credit score. Pay down your credit card balances at least a month before you apply for the car loan to be in a better position to potentially get a low-interest rate.
Tip: A relative or friend can co-sign on a vehicle loan with you to help you qualify, but be aware that if you miss payments on the vehicle loan at any point it will hurt that person’s credit too.
Tip: While a lower monthly payment on a lease may sound attractive, make sure you know the mileage restrictions, since these may conflict with how you plan to use the vehicle.