Whether you have decided to buy a Ferrari or a Ford, you should enjoy the excitement of purchasing your next car. But, before you get too excited, that car purchase also involves important decisions and can become an emotionally, not to mention financially, draining experience.
Buy a Used Car to Save Dollars
Let’s look at a few tips that make the car purchasing process easier. Even though buying new offers advantages (we’ll get to those in just a moment!), buying a used car can immediately save thousands of dollars. Those savings occur because of depreciation. A common adage is that a new car loses 20% of its value seconds after purchase. One year of mileage and normal use increases the depreciation to 30%. The rapid increase in depreciation affects your wallet when you decide to trade your pride-and-joy for another vehicle. Lower insurance costs add to the savings that you accumulate with a used car purchase.
Today, used cars offer better reliability than we’ve seen in the past. Chances are that your car will drive more than 100,000 miles before needing a major repair because of improved manufacturing and higher quality components. Overall, routine maintenance costs for tire rotations, oil changes, and brake repairs have decreased because of fewer scheduled maintenance stops.
Explore the Benefits of Purchasing a New Car
Even with the cost savings seen with a used car purchase, buying a new car also offers advantages. Many manufacturers offer attractive financing options that may include very low or no interest rates, package deals, or cash rebates. Each of those incentives can result in dollar savings for a vehicle that has no maintenance history. New cars also offer better technologies, increased comfort, and safety features that seem like something from science fiction. Finally, the warranty plans offered by manufactures provide peace-of-mind if your vehicle stops running.
Lease or Finance?
Many dealers offer leasing as well as financing plans. A lease plan can become an attractive option because of the lower monthly payments. Rather than paying against the principal of a traditional loan, your payments take care of the negotiated difference in price and the residual price—or the expected value of the vehicle at the end of the lease. As a result, you gain the ability to drive a late model, well-equipped car, truck, or SUV that remains covered by the manufacturer’s warranty. Your lease agreement removes any anxiety about trade-in values and the need to trade or sell the vehicle. If you own a business, the lease agreement may provide tax savings.
However, your decision to lease also has drawbacks. Every lease agreement includes mileage restrictions that include high excess mileage charges. Lease agreements also require the return of the car in its original condition. Any signs of excess wear or damage result in additional excess wear charges.
One of the key differences between leasing and purchasing a car is equity. You do not gain equity with a lease agreement. Your decision to finance the purchase of a new or used car gives you outright ownership of the vehicle. As you progress with the monthly payments, your equity increases. Unlike the lease agreement, a loan agreement has a set number of monthly payments that end with paying off the loan. Purchasing also eliminates any mileage restrictions and fees along with any fees for excess wear.
Take Care of Your Investment
Follow these tips to maintain the resale value of your newly purchased vehicle. Keep your car on a regular maintenance schedule and retain your maintenance records. Saving the receipts for oil changes, tire rotations, and other common repairs provides a maintenance history. Next, work to maintain the interior and exterior condition of your car. A minor investment in washing, waxing, and vacuuming your car keeps the car fresh and maintains its quality.