Tag Archives: Buy or Lease

Should you Buy or Lease that Next Car?

Long desired but fearful of repercussions of writing this article, we finally had the courage to jump in. Opinions on this subject are sometimes very strong (maybe even divisive!) on either side of the fence.

In doing research for this we came across a very handy internet site, www.usedfirst.com. While you may only be interested in buying a new car or leasing, one of the most important items is the residual value, especially in leasing. As the following neat graph shows from the site, there are dramatic differences in the decay value of cars. In our opinion, worthy of at least a few minutes research, especially if you are open to different makes and models.

 

Depreciation Comparison Studies

Those that are interested in buying a used car, the handy site will also target an expected BEST year to buy the car, as shown in the next very high end auto, with a steep depreciation schedule.

Benz Depreciation chart

The Case For Leasing

Leasing a car is by far the least expensive from a out of pocket standpoint (minimum monthly payment) way to get into a NEW Car.

In certain cases there is a great desire to drive a vehicle that is no more than two or three years old, in this case leasing is likely your best decision. Continued safety is certainly a big point for the new car ownership.

The Case For New Car

If you are one that must have a new car, but are willing to keep it for an extended period of time,  purchasing a new car is likely your best option.

A favorite place to buy a new car which we have had good experience is a membership program such as Costco or Sam’s or any other type of membership that gives you some sort of unique advantage or barrier for the general public. Always check the prices using your friendly Internet as there is tons of information out there to get the price range of the vehicle you want.

The Case for a Used Car

With a normal depreciation of between 15% and 30% per year (there are exceptions, but on the average these numbers are correct), our favorite “new car to you” purchase recommendation is buying a one or two-year-young automobile with low mileage, and keeping it until it will drive no more. Most cases this will save you a great deal of money-there are exceptions be sure, we recently ran onto a situation where a later year brand new car was within striking distance of a used car because the new models were coming out. In this case it made sense not to opt for a one-year-old car and just buy a late year new car. But on the margin, the statistics above are true.

Have a Great “Lease or Buy Car Informed” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Question of the Week: “Should I Buy or Lease My Car?”

This week we do our best to answer the lightning rod question of buying or leasing a car. While the answer lies in a slightly grey area, we will walk you through characteristics that make each decision correct for you.

According to CNW Market research new car buyers have the following characteristics:

  • 70% finance their car
  • 18% lease
  •  12% pay cash up front

Which option is best for me?

If you are a person who must have a new car every 3-4 years and will continue to trade your car in, no matter the situation, leasing is probably best for you. For everyone else, owning a car for an extended period of time, either through cash purchase or financing options, is probably best.

What is the most economical way to own a car?

Depreciation is our main foe in owning a car. According to the Edmonds auto site, it takes one second off the dealer’s lot to lose the first 10% of value of your car. It takes another 364 days to lose the remaining 9% for a total of 19% first year loss in value on the average new car.  After year two, most of us have lost 31% of the value, and by the end of year 3, our vehicles have gone down by almost 50% in total value.

If at all possible, the most economical (strictly by the numbers, no style points here) way to own a car is to own it for as long of a period of time as possible. By doing this, you will make much of your money back during the later, low depreciation years. The old saying “The cheapest car you can own, is a car you own!” is mostly true. 

Have a Super Friday and a Great Super Bowl Weekend!

Best Wishes, and Zigg Says “Hi”

JK

214-706-4300

www.jkfinancialinc.com