BalanceTrack: Drive Away Happy

Chapter 2: Whether to Buy New, Used or Lease

After you determine how much you can afford to spend, the next step is to decide between buying new, buying used, or leasing. It is important to be familiar with each option’s positive and negative aspects.

Buying Option	Advantages	Disadvantages
New	You can order the exact make, model and options that are most important to you. There are consumer protection laws on your side The car has value and becomes an asset as the loan is repaid New vehicles are typically most reliable Most warranties cover repairs and parts	New vehicles can be very expensive – with a high purchase price, requirements for full insurance coverage and costly registration fees. The value of the vehicle depreciates almost immediately
Used	You may be able to use savings to purchase the vehicle outright Used vehicle are less expensive than new cars As loan is repaid, the vehicle becomes an asset	Often, you don’t know the vehicle’s history. It may have been insufficiently maintained, and therefore less reliable. Rarely do used vehicles have warranties. Older vehicles tend to wear out – the maintenance cost increases over time.
Leased	The monthly payments are comparatively low. Leases are relatively short-term, so you can drive a new car every few years. Typically, leased vehicles have comprehensive warranties. The required up-front cost of a leased vehicle is fairly low. You can likely get a more luxurious model than through buying.	The vehicle does not belong to you. It is very difficult to get out of a lease contract if you become unable to handle your payments. The cost of insuring a leased vehicle can be very high. You must have good credit. There are mileage limitations, often 10,000–15,000 per year. You must pay for any additional mileage or damage beyond basic wear and tear.

When shopping for a used vehicle, know that more luxurious models tend to retain their value, and so sell for the highest price. You’ll typically find the deepest discounts on more standard vehicles. The best bargains can often be found on cars and trucks that were once leased vehicles, as well as those with the fewest special features.

While leasing may enable you to afford a nicer vehicle for less money each month than what you might be able to purchase, it is important to remember that leasing means renting. When the term of the lease is up, you return the vehicle. At that point, you have the option of paying any outstanding fees for mileage or damage, or purchasing the vehicle outright. Often, you will pay more over time by leasing and then purchasing than you would have had you simply bought in the first place. If, during the course of the lease contract, you choose to return the vehicle, very high penalties will likely apply. Also be aware that there is typically not as much room to negotiate a deal with a lease as there is when purchasing a vehicle, so look for the best initial offer you can find.

Save on Fuel Costs
Whether you buy or lease, the model you eventually drive away with will have an impact on your financial future. Filling the tank is a major expense for most people and nothing will save you more money at the station than a fuel-efficient vehicle. Large, heavy automobiles, trucks, and SUVs can burn up to three times as much fuel as small car, so choose carefully. There are even tempting tax breaks for investing in the latest technology: if you buy a new hybrid car, you may be eligible for a federal income tax deduction.

To further save on fuel costs:

Make sure your air filter is clean
Keep your tires filled with the right amount of air
Keep your clutch adjusted
Have enough – and clean – engine oil in your car
Choose the route with the flattest terrain and fewest stops
Use your air conditioner sparingly
Remove unused bike and luggage racks to make your vehicle aerodynamic
Keep the windows closed when traveling at high speeds
Avoid traffic jams and stop and go traffic
Remove heavy objects from the vehicle
Bike, walk, or use public transportation whenever possible
Turn the vehicle off rather than idle (when appropriate)
Don't warm up new vehicles – most don't need it
Avoid traveling at fast speeds in low gears
Drive the speed limit
Use cruise control on the open road, when safe
Use downward slopes to your advantage
Accelerate slowly when leaving the stop light
Buy regular unleaded versus the highest priced gasoline – most vehicles are built for it
Don't rev your engine
Arrange for car pools to share the cost of gas
Drive only when necessary
Use your navigation system (if available) to avoid getting lost and wasting gas
Combine errands into one trip