How best to buy a car: on credit, leasing or cash
Have you decided to buy a car in America? Even if you live in the megalopolis, sooner or later the question of purchasing a car will arise, writes Andrei Boychuk in the article for Immigrant porada.
In America, there are many options to get a car: leasing, rent, loan, purchase for cash. Consider the pros and cons of each method.
Buying a used car
Buying a used car with cash or credit is one of the cheapest options. This is due to the fact that the car is one of the things that depreciates the most in the first year of use. What I mean? So I bought a car for $ 25 and drove it out of the store, and the next day it is almost impossible to sell it for the same $ 25, because it won't be worth it.
Therefore, the best option in my opinion is to buy a 2-3 year old used car if you want to pay less. By the way, this is how I plan to buy the next car. A 2-3 year old car can be considered new or in good condition, since most car warranties are for 3 years or 36 thousand miles.
Should I buy a car older than 3-4 years? It depends on you. Now I drive Honda 2003, and not complaining, although the service for it is already a little more expensive. But the main thing for me in the car is that I can move from point A to point B, but with the birth of my daughter it became more important that the car was bigger.
Buying a new car
There are people who only want a new car. I understand these people, because I myself also somehow bought a brand new car in the salon. Naturally, new cars are more expensive, but the next 3, you can not worry about breakdowns, because the car is under warranty.
Leasing a new car - long term lease
You can also rent a new car on 2-4 of the year. For some, this is the best option, because Liz allows you to drive a new and prestigious car, and this is affordable for many. Again, in this case you pay on top. And in the end the car is not yours either.
Is this a bad option? I once thought yes. Why? Because someone once told someone, and he gave it to another, and I heard. Funny, is not it? Very funny, but, unfortunately, many myths are based on this approach.
This rental is beneficial for people who find it suitable. For example, those who do not drive more than 12 thousand miles a year, those who like to always have a new car, those who do not mind paying for rent, not for their car. Also, if you have a business, then a car on lease is an advantage, since part of the lease can be deducted from your income in the tax report.
Rent a car for a short period
For some, this option can be cheap and profitable, because some people need only a weekend or 1-3 once a month. Therefore, it makes no sense for you to buy a car or rent it for a long period of time.
As long as my wife did not start driving, we used it only on Saturday and Sunday, because on other days we worked. But since we live in a residential area, it was advantageous for us to have a car, and not to rent it. When we didn't have a car, we would rent it almost every weekend on Hotwire and went somewhere to rest.
A few years ago in America they opened a new service where you can rent a car for hours or days. Insurance and petrol included in the price, and sites with cars are located throughout the city. That is, at any time you can take and hand over the car. It is more expensive than the previous version, but in that case you will have to look for a good price, but here prices are always standard.
The cost of the car with different options
Few understood the options of how you can buy a car. Now let's talk about the financial part, which is more expensive and cheaper.
It is cheaper to buy a 3-year-old car for cash. But let's consider other options, because not everyone can buy a car that costs about $ 20 thousand for cash. Credits for a used car are mostly given at higher interest rates than on a new one.
Just recently, my friends, who have a good credit history, took a car on credit, and they were given a loan somewhere under about 2.5%. That is, the percentage is very small. But I warn you: such interest can only be obtained with a good credit history.
I took a new car, and my story was so-so. I was given a loan at 5.75% or 6.25% - you see what the difference is. Therefore, the next option after buying for cash is a 2-4 year old car on credit. It is also better to take a loan for an ordinary car for a short period, that is, for 2-3 years, and not for 5 years. Because it is financially more profitable for you.
A few words about a car loan
First, do not take a loan where you buy a car - for example, in a showroom Audiwhere you fill out an application with a bank representative Audi. My advice is this: go to your local bank and ask about auto loans: new and used. Compare interest rates and conditions and select the bank that suits you.
By the way, about the conditions. Some banks, for example, put additional conditions on used cars, for example, they give credit only for a car of a certain brand or with a certain number of miles or with a certain limit of years. So pay attention to this.
The next option is a loan for a new car. You need to pay a substantial down payment for the purchase, and your monthly payment will be more than, for example, a car lease. But in general it will come out cheaper than leasing. And this option will even be beneficial if you will be driving for more than 6 years.
Basically, I see that the Slavs do this: they buy a car on credit, pay it off, and on the day they paid it off, they look for a new car to borrow. If your goal is to always drive a new car, believe me, it is better for you to take a long-term lease (leasing), although it is more expensive, you are sure that you always have a new car.
Car leasing - this is the most expensive option of all when compared with a used or a new car on credit. But on the other hand, if you look at the monthly fee, then you pay less - $ 200, when for the same car on credit - $ 400. How is it that leasing is more expensive? But because at the end the car is not yours.
To see how small or big the price difference is, I took statistics from an article on the Edmunds website.
As you can see, the final price between a rental car and a used one is almost $ 8 thousand, which is a lot.
However and whatever you choose, I recommend only one thing. Take your time and sit down, think, consider what is profitable for you. Make, perhaps, a plate with 3 columns, where you list the advantages and disadvantages of each option and decide which option is right for you.
Or maybe you need to think more and not buy the car right away? Why do I say that? Once, when I was still living with my parents, well, respectively, I earned and never paid anything (housing, telephone, food), then there was more money than necessary. I bought myself a new one Volkswagen Jetta. It cost about $ 25 thousands.
The car was at home about 5 days a week and I rode it for 2 days - on weekends. After 6-8 months, I got carried away with collecting money to buy a home and realized that with a car loan I could not afford it and, accordingly, the bank did not give me a loan either. So I sold it back to the salon for $ 14 and lost $ 500. That was another mistake. You had to sell yourself to some other person and you also had to be able to bargain. Even then I did not know all this and did not know how. Well, I got caught. The lesson cost ten and a half thousand dollars. But I remember the lesson.
Therefore, determine your priorities and do what suits you.
About the Author: Andrey Boichuk - founder Immigrant porada (iporada.com) - platforms for Ukrainian immigrants in the United States. Cheerful husband beautiful wife and father of a joyful daughter.
This blog is translated from the Ukrainian language. The original article can be found on the website. "Immigrant Porada"(Ukrainian online advice platform for immigrants in the United States).
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