Monthly demands on income are often times overwhelming. As so many of us look to avoid cash advance or digging ourselves deeper into credit card debt, we try to find ways to pay less with having to cut out. Purchasing a vehicle is a big hurdle many have to face when it comes to squeezing out money for a payment. Should we buy new and lose a bunch of the long-term investment once it leaves the parking lot? Do we buy used and take the risk of having it break down as we drive it out of the parking lot? Do we lease a car and make monthly payment to borrow a car?
Let’s look at some advantages of each of these three options.
- Buying new – The car is in great condition, has lots of bells and whistles and is fully covered if something goes wrong. There is a sense of pride and for some it even boosts the ego. You can make any changes you want to your vehicle and have the option to sell at any time.
- Buying used – Many cars are in great condition and last a long time. The value depreciates slowly and resale is at the owner’s discretion without the large loss of value as with new cars. As with a new vehicle, you can make any changes you want to your vehicle and have the option to sell at any time.
- Leasing – People enjoy leasing cars in order to drive a vehicle which would normally be out of their price range. Those who like to switch cars often will not have to worry about the depreciation of value.
Cash advances and credit cards are often used to help with the upkeep and maintenance costs for vehicles.
Disadvantages to these options are plentiful:
- When you buy a new car, the value sharply decreases. The high price paid for new cars are spread out over 3-5 years of costly monthly payments.
- Used cars cost less overall but depending on the purchase, a person could still have up to five years of payments on their vehicle. Most used cars no longer fall under the warranty and new owners will eventually be repairing normal wear and tear and/or other problems which creep up unexpectedly.
- Leasing – You are tied to a contract. With all the payments you make, there will be no equity saved on your part. You’re not allowed to customize or modify the vehicle. If you go over the allotted mileage or have damage to the vehicle, you will be charged additional fees. You signed a lease and do not have the freedom to change vehicles or even purchase the car you have been leasing (these cars often have an option to buy once the lease runs out).
Make your decision based on what is affordable to you. Unexpected break downs and mechanic bills are often times leading causes for people to obtain cash advances or fill credit cards. If you paid cash for your used car, then you still need to budget for repairs. Unexpected emergencies are a budget category which needs some TLC until there is enough to cover extra costs. Keep it all in mind when looking to purchase or lease your next vehicle.
