Alpha CBA recommends that a majority of consumers BUY their next vehicle due to the numerous long-term financial benefits of owning and keeping a car for more than 5 years at a time.
Consider buying if you:
- plan to keep the vehicle for more than 4 years,
- enjoy the benefits of ownership (no more monthly payments after the “Term”),
- do not want to worry about constantly getting a new car,
- will use a large down payment amount (> 20%) or have a valuable “Trade-In”,
- drive a large amount of miles each year,
- do not want to worry about mileage & wear limits,
- are a cash buyer,
- have good credit, or
- love to customize your car.
Otherwise, consider leasing if you:
- normally do not keep your car more than 3-4 years,
- always want the latest & greatest features, technology and style,
- want a low monthly payment while putting little money down,
- do not want to worry about maintenance or mechanical repair expenses,
- do not drive an exorbitant amount of miles a year,
- selected a car whose value may be negatively impacted by future body changes and market conditions,
- use the vehicle for business allowing you to expense portions of the “Lease”,
- do not care about the long-term financial benefits of ownerships, or
- prefer a simplified process of just returning the vehicle to the dealer at the end of the “Term”.
Disadvantages of Buying include: 1) usually higher down payment requirements, 2) usually higher initial monthly payments, 3) higher interest rates for customers with bad credit, 4) full depreciation costs, and 5) vehicle will eventually not be covered under the manufacturer’s warranty exposing the consumer to full maintenance and mechanical repair costs in the future.
Disadvantages of Leasing include: 1) none of the long-term financial benefits of ownership, 2) mileage and wear limits, 3) need to buy or “Lease” another (or the same) vehicle once the “Term” is over, and 4) vehicle is always used during the period at which the level of depreciation is the highest (on average, new cars depreciate around 46% during their first three years).
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Use the Buy or “Lease” calculator to see how your monthly payments for each would compare.
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Be wary of all advertised specials. You should definitely read the fine print on any offer that you are considering. Most of these specials apply to base models and include a large down payment and most available incentives while excluding many taxes and fees. Even these specials can be negotiated.
ADDITIONAL “LEASE” CONSIDERATIONS:
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(Expert Tip) Never enter into a “Lease” unless you expect to keep the vehicle for the full “Term”.
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“Residual Value” as a percentage of “MSRP” and “Net Capital Cost” varies tremendously by make, model and “Term” options. Choose wisely among comparable vehicles in order to reduce your “Monthly Lease Payments”.
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Choose a “Lease” mileage allowance that is slightly higher than what you expect to drive each year.
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Try to “Lease” a vehicle for a period of time less than or equal to the duration of the underlying manufacturer’s warranty.
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“Trade-In” values are not deducted from the taxable amount in many states. This provides an additional benefit to BUY or another reason to perform a private-party sale.
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Factor in the annual cost of renewing state registrations when deciding whether or not to extend a “Lease” beyond any full year “Term”. (39 months vs 36 months) For the extra three months, you would still be required to pay a full year of registration fees to the state.