With wages always seemingly on the wane and car prices on the rise, acquiring a new car is becoming less and less affordable to the average American. Yet this poses a conundrum, most people in the United States rely completely on their car for transportation to and from work. Unless you live in one of the very few cities in America with safe, efficient public transportation, you will more than likely have no choice but to use personal transportation to make your living.
But this raises problems. Unless you’re a professional mechanic or have equivalent skills, buying a car with more than 100,000 miles on it is a real gamble. Past 100,000 miles, even modern cars begin to have exploding rates of mechanical problems. Some of these, such as a blown head gasket or blown transmission can render the car worthless, even if its estimated value prior to the break down was over $5,000. For most Americans, suddenly finding themselves without transportation or any way to get it would put them in a very tough spot.
One solution is to go with a brand new car under manufacturer warranty. But in the environment of tight credit that has taken hold since the financial crisis of 2008, for many, getting a new car, even a lower-cost model, is simply out of reach. If this describes you, what can you do? Leasing a new vehicle may well be the answer to your problems.
Leasing can get you into a brand new car
There are three main differences between leasing and owning, you don’t own the car, your monthly payments are typically much lower and the upfront costs are almost non-existent compared to buying on a bank loan. The last two have major effects on what kind of car you can get with leasing versus buying. All things being equal, leasing will get you much more car for your dollar than buying. If you would like to drive a luxury car but can only afford to buy a compact, you could probably get the car you want on a lease. But the real benefits come to those who otherwise wouldn’t be able to afford a new car at all. Leasing can help millions of Americans have the safety, reliability and confidence that comes from having a brand new car.
Leasing can lower your monthly payments by up to half
If you have anything less than a top credit score, buying a car on a bank loan can be a very expensive proposition. Between interest, late, prepayment and other penalties, by the time your loan is paid off, you will likely have ended up spending a great deal of the total paid in costs related to the loan. There’s no way to avoid these costs from translating into high monthly payments.
A typical payment on a $35,000 car may be $700-800 per month. A lease payment on that same car can easily be as low as $400 per month. Lease payments on some compact and sub-compact cars can get down to just a hair over $100 per month. And this is a payment on a brand new car!
Leasing will save you thousands in drive-away costs
People with lower credit ratings will find other major hurdles to buying a new car, besides just exorbitant monthly payments or not qualifying for a loan at all. Should they qualify, they will often be faced with staggering costs that must be paid to drive the car off the lot.
Most bank loans today will require a hefty down payment. These can be as much as 30 percent of the purchase price. On a $35,000 car, that amounts to over $10,000. And that doesn’t even include taxes, fees and the required insurance payments.
On the other hand, most leasing packages will allow you to drive away in a new car for just a couple hundred dollars in up-front expenses. Since most people don’t have anywhere near the few thousand dollars saved to make purchasing a new car a reality, leasing can become not just an attractive option, but the only one.
Not owning a car isn’t a quarter as bad as you might think it is
Owning a house is a great way to build wealth. That’s because, on average, houses always appreciate, increasing in value indefinitely and giving the owner something to show for his hard work and custodianship.
Unfortunately, cars are exactly the opposite. Most cars will lose 11 percent of their value the second they drive off the lot. A typical car will lose half of its resale value in its first three years of life. Owning an asset like this is never automatically a good thing and is very often a severe liability. Let the experts, dealerships, deal with the hassles of owning one of the most rapidly depreciating assets there are.