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Updated v.3.16 - Will Cover's 2018 buying guide to purchasing a new vehicle
Posted on 4/22/18 at 5:37 pm
Posted on 4/22/18 at 5:37 pm
About time I updated my original guide.
I hope that all of you who are in the market or plan to be in the market for a new vehicle are able to find some nuggets of information that will help you in your negotiation process and save you money.
Be forewarned, this is rather "lengthy." But then again, so are loan payments.
v.3.16
Do your homework first by researching and arming yourself with as much information as you can before you step foot into a car dealership (Invoice vs. MSRP, manufacturer rebates, dealer holdback, etc.). Do not rely on your friends or family members as everyone thinks they got a “good” deal and I am here to tell you that most of them did not.
Here are some interesting facts about buying a vehicle and the consumer behavior behind it:
• The average auto loan now exceeds $30,000.00 – CNBC
• Consumers borrow an average of $19,329.00 for used vehicles and $30,621 for new vehicles - ValuePenguin
• The average monthly auto loan payment is $502.00 – CNBC
• The average auto loan term is now 68 months (CNBC) with loans of 72 and 84 months becoming increasingly common. The longer loans make monthly payments more manageable even as interest rates rise.
• More than four out of five (85.1 %) new car buyers use financing to buy a car – MagnifyMoney
• Leasing accounts for 30 % of all new car sales. This is due to the high average price of new cars and the changing buying habits of American Customers – U.S. News & World Report
• The average household is now carrying $15,983.00 in credit card debt – NerdWallet
• 78 % of full-time working Americans are living paycheck to paycheck – Fox News
• Only 39 % of U.S. adults have enough to cover a $1000.00 emergency - Bankrate
• It is a good rule of thumb to assume that a new car will lose approximately 20 % of its value in the first year and 15 % each year after that until, after 10 years, it’s worth about 10 % of what is originally cost. That means a $30,000.00 vehicle will be worth $24,000.00 after the first year, $20,400.00 after the second year and $17,340.00 after the third year.
• Vehicles that depreciate the least (ranked in order): Jeep Wrangler, Toyota Tacoma, Toyota 4Runner, Nissan Frontier, Honda Pilot, Chevrolet Colorado, Honda HR-V, Jeep Renegade and Subaru WRX.
Car dealerships and car sales people love an uneducated and impatient buyer. The average person buys a new vehicle once every six years. The dealership and their sales people do this every day. They will try to tag-team you and wear you down, by having you wait for an extended period of time while they “check” with their manager. If you find this to be the case, know what power you possess by being able to “walk-away.”
If there were betting odds on this type of matchup, the sales person and dealership would be a heavy favorite. Why? Because, the car sales person and dealership usually have the most information. When the average buyer walks into a dealership, they’ll usually and automatically divulge information to the sales person which vehicle they want, how much they can pay per month and the vehicle they’re looking to trade in.
During the car negotiating process, you the buyer, need to keep a grasp on reality. If you can afford $20,000.00 vehicle and the object of your affection lists for $30,000,00, you might be able to negotiate it down to, say, $27,000.00. But there's no way you're going to be able to buy it for $20,000.00 unless there's a $7,000.00 rebate.
Below are excellent sites to research the vehicle of your choice (know the dealer’s “hold-back” price and what type of “incentives” that may be offered from the manufacturer or dealership):
https://www.realcartips.com/car-incentives/best-car-deals.shtml
https://www.carclearance.com
https://www.kbb.com/new-cars/car-incentives-and-rebates
https://www.edmunds.com/car-incentives
https://cars.usnews.com/cars-trucks/best-car-deals
https://www.nadaguides.com/Cars/Incentives-and-Rebates
1. Prior to taking a test drive, make a copy of your driver’s license and insurance card. By doing this, if the dealer happens to “accidentally” misplace either or both of these items, you can still leave at any time, because you kept your originals.
2. Never show emotion when taking a test drive. Never show emotion negotiating. Never offer the first price. The opening number defines the entire negotiation. Start off negotiations by saying, “well, we have to start somewhere,” or “that’s not good enough.” Never accept the first price. And never offer a counter price. Silence is golden and can be the key to getting the deal that you want. It is the car sales person and dealership’s responsibility to provide you with the numbers. Your only responsibility is to either accept or decline the number(s) presented to you. Know what power you possess by being able to “walk away.”
3. The best time to buy a vehicle is when you are ready to buy. However, waiting until the latter part of the month can work to your advantage, as dealers have projected sales in units they have to meet as well as the lending financial institutions. As the month progresses and less time on their side, the dealership may be more likely to want to move a vehicle to receive more back-end money from the manufacturers.
4. Special ordering the vehicle of your choice allows the dealer more profit, as they do not have to finance (floor plan) a vehicle that is ordered. When used correctly, such as if dealer tries to strong arm you and say they are not making any money on your sale, this should give you more leverage in the negotiation process.
5. Never negotiate off “MSRP.” The negotiation process should start from the DEALER COST (which is less than INVOICE) price or the WHOLESALE price if purchasing a USED vehicle.
6. Rebates can be deducted from INVOICE price and not MSRP as the dealership will lead you to believe.
7. Don’t discuss a trade-in until you’ve settled on a price for the vehicle you’re buying. Each transaction should be separate and are not dependent upon one another.
8. Talk price, not payment. If a dealer can get you to focus on a monthly payment, they have a better chance of making a lot more profit from the sale of a car. Always focus on the final price of the vehicle you’re negotiating.
9. Settle on the price of the vehicle you’re interested in before you bring up financing – don’t let the rate of a loan influence the price of the vehicle. Have your financing pre-approved before you walk into a dealership. The little differences in the numbers can be huge. Consider this: $20,000 financed over five years at 3.9% costs $2,045.80 in interest. The same deal at 7.9 percent costs $4,272.20 -- a difference of more than $2,226.00. If you’re intent on financing, I highly recommend Pentagon Federal Credit Union or Lightstream (a division of SunTrust Bank) for auto financing.
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
I hope that all of you who are in the market or plan to be in the market for a new vehicle are able to find some nuggets of information that will help you in your negotiation process and save you money.
Be forewarned, this is rather "lengthy." But then again, so are loan payments.
v.3.16
Do your homework first by researching and arming yourself with as much information as you can before you step foot into a car dealership (Invoice vs. MSRP, manufacturer rebates, dealer holdback, etc.). Do not rely on your friends or family members as everyone thinks they got a “good” deal and I am here to tell you that most of them did not.
Here are some interesting facts about buying a vehicle and the consumer behavior behind it:
• The average auto loan now exceeds $30,000.00 – CNBC
• Consumers borrow an average of $19,329.00 for used vehicles and $30,621 for new vehicles - ValuePenguin
• The average monthly auto loan payment is $502.00 – CNBC
• The average auto loan term is now 68 months (CNBC) with loans of 72 and 84 months becoming increasingly common. The longer loans make monthly payments more manageable even as interest rates rise.
• More than four out of five (85.1 %) new car buyers use financing to buy a car – MagnifyMoney
• Leasing accounts for 30 % of all new car sales. This is due to the high average price of new cars and the changing buying habits of American Customers – U.S. News & World Report
• The average household is now carrying $15,983.00 in credit card debt – NerdWallet
• 78 % of full-time working Americans are living paycheck to paycheck – Fox News
• Only 39 % of U.S. adults have enough to cover a $1000.00 emergency - Bankrate
• It is a good rule of thumb to assume that a new car will lose approximately 20 % of its value in the first year and 15 % each year after that until, after 10 years, it’s worth about 10 % of what is originally cost. That means a $30,000.00 vehicle will be worth $24,000.00 after the first year, $20,400.00 after the second year and $17,340.00 after the third year.
• Vehicles that depreciate the least (ranked in order): Jeep Wrangler, Toyota Tacoma, Toyota 4Runner, Nissan Frontier, Honda Pilot, Chevrolet Colorado, Honda HR-V, Jeep Renegade and Subaru WRX.
Car dealerships and car sales people love an uneducated and impatient buyer. The average person buys a new vehicle once every six years. The dealership and their sales people do this every day. They will try to tag-team you and wear you down, by having you wait for an extended period of time while they “check” with their manager. If you find this to be the case, know what power you possess by being able to “walk-away.”
If there were betting odds on this type of matchup, the sales person and dealership would be a heavy favorite. Why? Because, the car sales person and dealership usually have the most information. When the average buyer walks into a dealership, they’ll usually and automatically divulge information to the sales person which vehicle they want, how much they can pay per month and the vehicle they’re looking to trade in.
During the car negotiating process, you the buyer, need to keep a grasp on reality. If you can afford $20,000.00 vehicle and the object of your affection lists for $30,000,00, you might be able to negotiate it down to, say, $27,000.00. But there's no way you're going to be able to buy it for $20,000.00 unless there's a $7,000.00 rebate.
Below are excellent sites to research the vehicle of your choice (know the dealer’s “hold-back” price and what type of “incentives” that may be offered from the manufacturer or dealership):
https://www.realcartips.com/car-incentives/best-car-deals.shtml
https://www.carclearance.com
https://www.kbb.com/new-cars/car-incentives-and-rebates
https://www.edmunds.com/car-incentives
https://cars.usnews.com/cars-trucks/best-car-deals
https://www.nadaguides.com/Cars/Incentives-and-Rebates
1. Prior to taking a test drive, make a copy of your driver’s license and insurance card. By doing this, if the dealer happens to “accidentally” misplace either or both of these items, you can still leave at any time, because you kept your originals.
2. Never show emotion when taking a test drive. Never show emotion negotiating. Never offer the first price. The opening number defines the entire negotiation. Start off negotiations by saying, “well, we have to start somewhere,” or “that’s not good enough.” Never accept the first price. And never offer a counter price. Silence is golden and can be the key to getting the deal that you want. It is the car sales person and dealership’s responsibility to provide you with the numbers. Your only responsibility is to either accept or decline the number(s) presented to you. Know what power you possess by being able to “walk away.”
3. The best time to buy a vehicle is when you are ready to buy. However, waiting until the latter part of the month can work to your advantage, as dealers have projected sales in units they have to meet as well as the lending financial institutions. As the month progresses and less time on their side, the dealership may be more likely to want to move a vehicle to receive more back-end money from the manufacturers.
4. Special ordering the vehicle of your choice allows the dealer more profit, as they do not have to finance (floor plan) a vehicle that is ordered. When used correctly, such as if dealer tries to strong arm you and say they are not making any money on your sale, this should give you more leverage in the negotiation process.
5. Never negotiate off “MSRP.” The negotiation process should start from the DEALER COST (which is less than INVOICE) price or the WHOLESALE price if purchasing a USED vehicle.
6. Rebates can be deducted from INVOICE price and not MSRP as the dealership will lead you to believe.
7. Don’t discuss a trade-in until you’ve settled on a price for the vehicle you’re buying. Each transaction should be separate and are not dependent upon one another.
8. Talk price, not payment. If a dealer can get you to focus on a monthly payment, they have a better chance of making a lot more profit from the sale of a car. Always focus on the final price of the vehicle you’re negotiating.
9. Settle on the price of the vehicle you’re interested in before you bring up financing – don’t let the rate of a loan influence the price of the vehicle. Have your financing pre-approved before you walk into a dealership. The little differences in the numbers can be huge. Consider this: $20,000 financed over five years at 3.9% costs $2,045.80 in interest. The same deal at 7.9 percent costs $4,272.20 -- a difference of more than $2,226.00. If you’re intent on financing, I highly recommend Pentagon Federal Credit Union or Lightstream (a division of SunTrust Bank) for auto financing.
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
This post was edited on 4/22/18 at 5:51 pm
59
Posted on 4/22/18 at 5:38 pm to Will Cover
11. Dealers often make as much money in the “business office, i.e. F&I room” as they do on the showroom floor. Insurance, dealer add-ons, extra fees and interest rate changes are among the common ploys you could get clobbered with on your way out the door (administrative fees, handling charges, advertising fees, paint protection, VIN etching – simply do not pay these as these are deal breakers). And believe it or not, even “delivery” charges are negotiable.
12. GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.) in the event of an accident. Do you need it? Only you can decide. However, it is optional insurance coverage and you are NOT required to purchase it (unless specified by your auto loan terms). Car dealers sell GAP insurance coverage at a ridiculously inflated price. Figures can reach as much as 4 x the actual cost versus purchasing GAP insurance at your local credit union or insurance company.
13. Get the deal in writing. Full disclosure, in writing, of all fees pertaining to your vehicle purchase, such as destination, title, documentation, licensing and registration. If the dealer will not put it writing, “walk away.”
14. If asked, do not share pricing with another dealership. The less they know, the more aggressive they need to be to compete for your business.
15. Put deposits on a “credit card” only. Do NOT pay with a check.
16. The “If I” sales tactic. This is the last step in the sales negotiation process. Ex. If I decide to purchase the vehicle today, you have to include free window tinting. If I decide to take the red vehicle instead of the white vehicle, you have to include 5 free oil and tire rotation services. If I decide to purchase the vehicle today, you have to include floor mats at no additional cost. If done correctly, this will allow you to get another “service and/or product” that you normally would not have received and by this time, there is no way will the dealership allow you to “walk” because there is too much time invested between both parties. The dealership knows you are in a buying mode and doesn’t want to run the risk of you becoming a “be back” customer for another dealership since most people buy within 48 hours of stepping onto a dealership’s lot.
17. If you got a great deal, show your appreciation. Thank the dealer and be sure to send your friends to them when they go car shopping.
Final thoughts. Do NOT become emotionally involved or attached to a vehicle. Remember, if you aren't able to come to an agreement to your liking, you must have the discipline and self-control to walk away. After all, it’s your money and you get to decide what you want to do with it. In short, don’t let your heart rule your head – it can lead to aching in both body parts.
And while a vehicle for many is considered a “need” today, the type of vehicle you are looking to bring home is most likely a “want.”
Best of luck to you in your decision-making process!
12. GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.) in the event of an accident. Do you need it? Only you can decide. However, it is optional insurance coverage and you are NOT required to purchase it (unless specified by your auto loan terms). Car dealers sell GAP insurance coverage at a ridiculously inflated price. Figures can reach as much as 4 x the actual cost versus purchasing GAP insurance at your local credit union or insurance company.
13. Get the deal in writing. Full disclosure, in writing, of all fees pertaining to your vehicle purchase, such as destination, title, documentation, licensing and registration. If the dealer will not put it writing, “walk away.”
14. If asked, do not share pricing with another dealership. The less they know, the more aggressive they need to be to compete for your business.
15. Put deposits on a “credit card” only. Do NOT pay with a check.
16. The “If I” sales tactic. This is the last step in the sales negotiation process. Ex. If I decide to purchase the vehicle today, you have to include free window tinting. If I decide to take the red vehicle instead of the white vehicle, you have to include 5 free oil and tire rotation services. If I decide to purchase the vehicle today, you have to include floor mats at no additional cost. If done correctly, this will allow you to get another “service and/or product” that you normally would not have received and by this time, there is no way will the dealership allow you to “walk” because there is too much time invested between both parties. The dealership knows you are in a buying mode and doesn’t want to run the risk of you becoming a “be back” customer for another dealership since most people buy within 48 hours of stepping onto a dealership’s lot.
17. If you got a great deal, show your appreciation. Thank the dealer and be sure to send your friends to them when they go car shopping.
Final thoughts. Do NOT become emotionally involved or attached to a vehicle. Remember, if you aren't able to come to an agreement to your liking, you must have the discipline and self-control to walk away. After all, it’s your money and you get to decide what you want to do with it. In short, don’t let your heart rule your head – it can lead to aching in both body parts.
And while a vehicle for many is considered a “need” today, the type of vehicle you are looking to bring home is most likely a “want.”
Best of luck to you in your decision-making process!
This post was edited on 4/22/18 at 5:47 pm
Posted on 4/22/18 at 5:39 pm to Will Cover
1. Do research
2. Be willing to walk
TLDR
ETA: Ah this is a guide for poors. Good luck gentlemen
2. Be willing to walk
TLDR
ETA: Ah this is a guide for poors. Good luck gentlemen
This post was edited on 4/22/18 at 7:52 pm
Posted on 4/22/18 at 5:40 pm to Will Cover
Why Car Leasing is Generally a Bad Idea
Leasing provides a good deal for four parties - the sales person, the F & I guy, the dealership’s owner and the finance company (leasing company). It is a lousy deal for the customer. You owe something, but you own nothing. Leasing adds a layer of complexity to the deal that allows the salesman to hide or misrepresent the true purchase price.
The less you understand about the following terminology, the more susceptible you are to accepting a bad deal:
• Capitalized Cost – This is the vehicle’s selling price and can be negotiated. This is the total amount you’re financing, including the negotiated price of the vehicle, all options, fees and taxes. It should be under the Manufacturer’s Suggested Retail Price (MSRP).
• Capitalized Cost Reduction – Your down payment. This can be negotiated.
• Acquisition Fee (Bank Fee) – An administrative fee. This is usually lumped into the Capitalized Cost a.k.a. “due at signing” figure. In this respect, it is a “hidden fee.” Acquisition fees vary among leasing companies. Typically, dealers do not make a profit on this fee, although some leasing companies may “kick back” part of the fee to the dealer as a reward for sending them business. Acquisition fees range from $395.00 to $1095.00, with an average of about $595.00. And contrary to what the finance company (a.k.a. leasing company) wants you to believe, this is a fee that can be negotiated.
• Disposition Fee – This is a fee that can be imposed (Did you read the contract?) should you decide not to buy the leased vehicle at the end of the lease term. This is a fee that can be negotiated.
• Money Factor – This is your interest rate. In order to get the Money Factor, you have to multiply it by 2,400. The Money Factor is set by the finance company (a.k.a. leasing company) and can be different depending on which finance company (a.k.a. leasing company) you decide to use. The Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet.
• Residual Value – This is the value of the vehicle at the end of the lease. Residual values can be different depending on which finance company (leasing company) you decide to use, but Automotive Lease Guide Residual Percentage Guide is the industry’s bible.
Most people are quick to answer a sales person when he/she asks if they’re planning to buy or lease a vehicle. As soon as you give away that you’re planning to lease, the price of the vehicle (capitalized cost) will freeze up. You’ve essentially lost any leverage you had at this dealership. You should negotiate the price of the new vehicle as if you’re going to pay for it with cash out of your own pocket and then bring that over to the lease.
Leasing has become an incredibly effective tool for dealers to sell their product at a significantly higher price and profit margin and is often “pushed” or “encouraged” through the sales process.
• Leasing makes the car more affordable and therefore easier to sell. The buyer gets focused on being able to drive a nicer vehicle for a lower monthly note than what they most likely could not afford to buy.
• It allows the customer to afford a more expensive car, and the more expensive the car, the larger the profit.
• Leasing allows the dealer to legally hide the true cost/price of the vehicle and charge you a higher price than you would normally agree to.
• A leasing customer is more likely to return to the same dealership to get their next vehicle and next vehicle and next vehicle. Even though your original sales person will be long gone, the dealership is able to maintain customer retention and that’s where it pays off in the long run.
An inflated residual value lowers your monthly payments, but it can also handcuff you. A more realistic residual value will make it easier to sell the lease, trade your vehicle in the middle of the lease or buy the vehicle at the end of the lease. Many people get lured in by the low initial payment, but should beware that all the financial factors that go into leasing, including trading in your current vehicle to obtain a new leased vehicle will effectively ensure your monthly payment will be much higher in subsequent leases. This makes it hard to break the cycle and purchase future vehicles with a sizable down payment.
Be careful of charges for excessive wear and tear. A leasing contract requires you to return the vehicle in good shape. But your definition of good shape may not match your leasing company’s definition. Prior to turning your vehicle back in, ask the leasing company to inspect it for wear and tear. If there are any dings, dents or chips, get them fixed ahead of time rather than have the dealer charge you for them later. It’s usually cheaper to get the repairs done on your own watch; otherwise, the dealer could charge you for full body shop work.
A person that decides to lease a vehicle needs to know how many miles they are going to drive in a year. Leases typically allow for 10,000, 12,000 or 15,000 miles per year. With a common lease period being 36 months, that mean you have to stay under 30,000, 36,000 or 45,000 miles for the life of the lease. The lower the mileage limits, the lower the depreciation of the lease and lower the monthly payment.
If you surpass the mileage limit, you’ll have to pay at least 25 cents per additional mile. But if you know you are going to surpass the mileage limit, you can negotiate buying extra miles for a lower rate than 25 cents per additional mile. While you’ll end up with a larger monthly lease payment, it will be comparatively cheaper than paying for hundreds of additional miles at the end.
Simply put, leasing is the equivalent of throwing a $100.00 bill out of your vehicle’s window every week for 3 years in terms of depreciation. The bottom line is this … any way you look at it, leasing is a convenience that you’ll pay for in the end. Put another way, if you can’t afford to buy your next vehicle with a four-year loan or less, then you really can’t afford it. The better deal long-term is to buy a reliable vehicle (good, late model used vehicle or lower priced new vehicle) and hold onto it as re-leasing every three to five years is no way to build wealth.
Leasing provides a good deal for four parties - the sales person, the F & I guy, the dealership’s owner and the finance company (leasing company). It is a lousy deal for the customer. You owe something, but you own nothing. Leasing adds a layer of complexity to the deal that allows the salesman to hide or misrepresent the true purchase price.
The less you understand about the following terminology, the more susceptible you are to accepting a bad deal:
• Capitalized Cost – This is the vehicle’s selling price and can be negotiated. This is the total amount you’re financing, including the negotiated price of the vehicle, all options, fees and taxes. It should be under the Manufacturer’s Suggested Retail Price (MSRP).
• Capitalized Cost Reduction – Your down payment. This can be negotiated.
• Acquisition Fee (Bank Fee) – An administrative fee. This is usually lumped into the Capitalized Cost a.k.a. “due at signing” figure. In this respect, it is a “hidden fee.” Acquisition fees vary among leasing companies. Typically, dealers do not make a profit on this fee, although some leasing companies may “kick back” part of the fee to the dealer as a reward for sending them business. Acquisition fees range from $395.00 to $1095.00, with an average of about $595.00. And contrary to what the finance company (a.k.a. leasing company) wants you to believe, this is a fee that can be negotiated.
• Disposition Fee – This is a fee that can be imposed (Did you read the contract?) should you decide not to buy the leased vehicle at the end of the lease term. This is a fee that can be negotiated.
• Money Factor – This is your interest rate. In order to get the Money Factor, you have to multiply it by 2,400. The Money Factor is set by the finance company (a.k.a. leasing company) and can be different depending on which finance company (a.k.a. leasing company) you decide to use. The Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet.
• Residual Value – This is the value of the vehicle at the end of the lease. Residual values can be different depending on which finance company (leasing company) you decide to use, but Automotive Lease Guide Residual Percentage Guide is the industry’s bible.
Most people are quick to answer a sales person when he/she asks if they’re planning to buy or lease a vehicle. As soon as you give away that you’re planning to lease, the price of the vehicle (capitalized cost) will freeze up. You’ve essentially lost any leverage you had at this dealership. You should negotiate the price of the new vehicle as if you’re going to pay for it with cash out of your own pocket and then bring that over to the lease.
Leasing has become an incredibly effective tool for dealers to sell their product at a significantly higher price and profit margin and is often “pushed” or “encouraged” through the sales process.
• Leasing makes the car more affordable and therefore easier to sell. The buyer gets focused on being able to drive a nicer vehicle for a lower monthly note than what they most likely could not afford to buy.
• It allows the customer to afford a more expensive car, and the more expensive the car, the larger the profit.
• Leasing allows the dealer to legally hide the true cost/price of the vehicle and charge you a higher price than you would normally agree to.
• A leasing customer is more likely to return to the same dealership to get their next vehicle and next vehicle and next vehicle. Even though your original sales person will be long gone, the dealership is able to maintain customer retention and that’s where it pays off in the long run.
An inflated residual value lowers your monthly payments, but it can also handcuff you. A more realistic residual value will make it easier to sell the lease, trade your vehicle in the middle of the lease or buy the vehicle at the end of the lease. Many people get lured in by the low initial payment, but should beware that all the financial factors that go into leasing, including trading in your current vehicle to obtain a new leased vehicle will effectively ensure your monthly payment will be much higher in subsequent leases. This makes it hard to break the cycle and purchase future vehicles with a sizable down payment.
Be careful of charges for excessive wear and tear. A leasing contract requires you to return the vehicle in good shape. But your definition of good shape may not match your leasing company’s definition. Prior to turning your vehicle back in, ask the leasing company to inspect it for wear and tear. If there are any dings, dents or chips, get them fixed ahead of time rather than have the dealer charge you for them later. It’s usually cheaper to get the repairs done on your own watch; otherwise, the dealer could charge you for full body shop work.
A person that decides to lease a vehicle needs to know how many miles they are going to drive in a year. Leases typically allow for 10,000, 12,000 or 15,000 miles per year. With a common lease period being 36 months, that mean you have to stay under 30,000, 36,000 or 45,000 miles for the life of the lease. The lower the mileage limits, the lower the depreciation of the lease and lower the monthly payment.
If you surpass the mileage limit, you’ll have to pay at least 25 cents per additional mile. But if you know you are going to surpass the mileage limit, you can negotiate buying extra miles for a lower rate than 25 cents per additional mile. While you’ll end up with a larger monthly lease payment, it will be comparatively cheaper than paying for hundreds of additional miles at the end.
Simply put, leasing is the equivalent of throwing a $100.00 bill out of your vehicle’s window every week for 3 years in terms of depreciation. The bottom line is this … any way you look at it, leasing is a convenience that you’ll pay for in the end. Put another way, if you can’t afford to buy your next vehicle with a four-year loan or less, then you really can’t afford it. The better deal long-term is to buy a reliable vehicle (good, late model used vehicle or lower priced new vehicle) and hold onto it as re-leasing every three to five years is no way to build wealth.
This post was edited on 4/22/18 at 5:41 pm
Posted on 4/22/18 at 5:43 pm to Will Cover
Bookmarked. Again.
Posted on 4/22/18 at 5:44 pm to Will Cover
Why do you hate car salesman’s families who you are stealing their livelihood from?
Posted on 4/22/18 at 5:46 pm to OleWarSkuleAlum
Car salesmen should choose a different job then.
Posted on 4/22/18 at 5:48 pm to Will Cover
I’ll never buy a new vehicle again. Cash money for medium mileage Toyotas from here on in my life. To hell with making auto companies rich off my dime.
Posted on 4/22/18 at 5:51 pm to Will Cover
I’m about to lease a BMW convertible.
Posted on 4/22/18 at 5:53 pm to Will Cover
Thank you WC!!
I never plan on buying a new car again but I love educating myself about anything financial.
I never plan on buying a new car again but I love educating myself about anything financial.
Posted on 4/22/18 at 5:54 pm to Mo Jeaux
I'm going to lease a 2011 F150 with 160,000 miles for 3 years at $450 a month. I felt good when I walked OTD.
Posted on 4/22/18 at 5:57 pm to Will Cover
Thanks Will
Posted on 4/22/18 at 6:01 pm to Will Cover
At what age would you no longer consider removing the dew claws off of a puppy?
Posted on 4/22/18 at 6:01 pm to Will Cover
As soon as I saw the thread title I bookmarked this 
. I'll likely be getting a new or used truck this year after driving the same car since 2009 so I'll be using your advice for sure
. I'll likely be getting a new or used truck this year after driving the same car since 2009 so I'll be using your advice for sure
Posted on 4/22/18 at 6:01 pm to Will Cover
Posted on 4/22/18 at 6:05 pm to Will Cover
Will, in your opinion, should folks aim for new over used simply due to low rates and high used prices?
Or too many other factors with used like mileage, condition, owners, year etc?
Or too many other factors with used like mileage, condition, owners, year etc?
Posted on 4/22/18 at 6:08 pm to Will Cover
Thanks will, this came in handy during my last purchase
Posted on 4/22/18 at 6:18 pm to Will Cover
quote:
You owe something, but you own nothing.
Owning a car is nothing but an insane service bill waiting for you 4/5 years into owning it.
Posted on 4/22/18 at 6:18 pm to Will Cover
No emotion is ok, but annoyed a-hole is a perfectly good one to use as long as you have your facts. I knew what kbb value on the trade was, interest rates, and invoice on what she was buying.
Bought my wife a new one last week, ended up pretty well I'd say.
Bought my wife a new one last week, ended up pretty well I'd say.
Posted on 4/22/18 at 6:20 pm to Will Cover
quote:
10. Extended warranties never make financial sense. Consumer Reports conducted a survey that showed 55 % of extended warranty purchasers hadn’t used it during the lifetime of the policy. And, on average, the ones who did spent hundreds more for the coverage than they saved in repair costs.
Thanks for posting/updating. Number 10 is not my experience, in every case it had paid off for me
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