Never, Ever, Ever....

Posted by Amanda on September 30, 2007 1:09 PM PDT

Recommend this? YES NO

lease a car.

Buy your own car. Unless you're filthy rich or well off, buy a used car rather than a new one. Start at your credit union, get pre-approved for a car loan , then shop around for the right car based on the loan you're approved for.

When you buy your car, monthly payments go toward building up equity and when you're done paying up, you will actually OWN the car and you're free to keep it, sell it, or trade it in for another one.

If you do your research properly, you will find that dozens of (honest) dealers, government officials, consumer advocates, and consumers themselves would give you the same advice.

Leasing a car is a bit like renting an apartment: You're paying someone else, a landlord or a car dealer.

Terms to the contract are often overly-expensive, convoluted, and difficult to understand. Did you know that the law doesn't require dealers to disclose all the numbers, as well?

Most "financial benefits" are to simply to reel you in. What's more, studies have shown that if you buy a new car and keep it for ten years, you will be thousands of dollars richer in retirement!

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2 Comments

Cars are a poor investment since they depreciate so quickly. A brand new car loses a huge percentage of its value as soon as you drive it off the lot. So if you want to minimize the loss of capital through depreciation, buy a used car that is in great shape.

The ideal used car is less than 3 years old, still under warranty and has fewer than 50,000 miles on the odometer. Various car brands depreciate at varying rates: some luxury Japanese brands keep their value for several years. Most other brands lose up to one third of their value within three years. Best bet: read Consumer Reports for their reader survey on car repairs and resale value.

Be aware that there are pitfalls to purchasing a used car. Whether you are planning to buy a used car from a dealer or direct from the owner, be sure to hire a mechanic to inspect the vehicle for you. The investment of $50 to $100 for an independent evaluation can spare you the misery of purchasing a car that was severely damaged and rebuilt. I do this routinely and have been surprised to learn that many cars that were apparently in great shape are actually great looking wrecks with cracks in the manifold, multiple collisions, bent frames and so on.

Posted by Rob on September 30, 2007 5:26 PM PDT

Amanda - I'm with you. I know it's not for everyone - many people love their new shiny cars, but for my dollar I'll go with used. The money saved can be used to start a business, added to a fun money fund or an IRA. It can even give you the room for luxuries like massages or an extra trip this year!