Do you hate buying cars? Do you feel unarmed and defenseless? Buying or leasing a car can be one of the most emotionally wrenching experiences. What is better, a purchase or a lease? What dangers are there in leasing? Join Rick and Brandon as they shed some light on these issues. In addition, jump on board for Rick’s current quest in purchasing his next car. Tune in each week to see the progress and problems that Rick experiences that may help you in your search.
- Buying or leasing a car
- Don’t rush
- Account for your down payment
- Consider selling your current car “as is” before you buy, if you have a backup vehicle.
- Go to multiple dealers and multiple companies to compare and contract among them
- Understand the details of lease vs purchase. (We will discuss the difference in detail between leasing and buying a vehicle on another podcast.)
- Leasing:
- If you have very little for a down payment, then leasing may be your only option.
- Start with what you can afford (to pay each month for a lease.
- If you like having a newer car, then leasing can quench that thirst.
- Check out the maximum mileage allowed for a lease. If you drive a lot, the lease can cost you a lot more when you go over the preset limit.
- 5 dumb car leasing mistakes to avoid according to bankrate.com
- Don’t prepay your lease to get the payments down at the beginning. “But prepaying is a problem if the car is wrecked or stolen in the first few months.” The company would probably get the payout and the customer is out of luck. The site recommends no more than $2,000 up front.
- Ask if the contract includes “gap insurance coverage” to cover the insurance payout and the lessee’s total obligation.
- Know you driving habits because excess mileage can cost you18-25 cents a mile
- Repair anything more than normal use to avoid excessive repair charge when you return the vehicle.
- Lease cars only to their warranty period ( 3 years/ 36k mileage) to avoid paying extra in maintenance.
- Buying
- Start with your budget again. What monthly payments can you afford a month?
- Look for auto dealer bargains such as: rebates, zero interest financing, free maintenance.
- After applying the down payment that you can afford, what are you monthly payments?
- If you know which car you want to buy, work with a dealer and balance your affordable down payment against your affordable monthly payments.
- Check out the loan term. If you generally only keep a car for 4 years, don’t take out an auto loan for 5 years.
- The biggest benefit is now you own the car and will probably have a down payment on the trade-in or sale.
- Leasing:
- Tax considerations (check with your CPA because you situation may be unique)
- For small mid-sized business owners
- Vehicles owned by business
- 100% used
- Less than 100% used
- W-2 inclusions for personal use
- Vehicles owned by Owner, personally
- Allowance (taxable)
- Reimbursed costs ( not taxable)
- Mileage (56 cents per mile) (not taxable)
- Check with your CPA about the “inclusion” amount that you may have to add back into your income for the use of a passenger vehicle.
- Vehicles owned by business
- For small mid-sized business owners
Sources: 5 dumb car leasing mistakes to avoid bankrate.com
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