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JThornton
I am considering whether to purchase a new car for 25,000 with 2500 down for 24 months or to lease a car for 24 months with 2000 down. Please advise.
Unregistered
You do not say anything about your current financial situation (i.e. income, debt, etc.) nor about your motives for buying the new car (vs. buying a 1 or 2 yr. old model which would cost considerably less). Are you driving the car for business purposes? Are you better able to afford monthly payments on a lease? Do you currently have a car that you would be selling or trading to add to your down payment?
Without an idea of the whole scenario, here's my general advice: In either case you consider, you are looking at payments over an extended period of time. With the lease you will be obligated for only 2 years, at which time you can either trade in and start the lease ("rent") process all over again or you can buy the car outright, most assuredly paying more than the car is worth. You also must consider all the other costs of a leased vehicle, such as milage overage surchanges and the repairs to any damage to the vehicle when returned (assuming you choose to turn in the car after 2 years). I would almost never recommend a lease (even with those enticingly lower payments, simply because of all the risks and because of the fact that you own 0% of the car over those 2 years---the finance company does---so you're throwing money down the drain.
That being said, the idea of purchasing a new car isn't much more appealing. That $25,000 car will have depreciated in value to probably about $15,000 within the first 2 or 3 years. Is buying a brand new car worth that cost to you? You should check out the various calculators on the Kiplinger "tools" portion of the site to compare your options in detail.
Hope this helps.
brian g
Closer
Sorry but you are not "Throwing money down the drain" when you lease. If you were to purchase a vehicle and pay real cash then you own it. If you finance you don't own the vehicle until it is paid for. The difference is in your buying reasons and needs. If you are the type of buyer who trades every 3 years or so, as many of you do, then a lease is great for you. You have a low down payment a lower than purchase monthly payment and you return the vehicle to the manufacturer when your done. If the vehicle is not worth the residual the manufacturer will take the loss at auction. If the vehicle is worth more than your residual or "payoff" then trade the vehicle and apply the equity to your next vehicle. Keep in mind with a lease you are almost always in warranty. If you rent a home and pay rent for living in the home is that throwing your money down the drain or is it getting a need met for a monthly fee. Buy the car if your going to keep it well beyond the # of years you are financing it for. Otherwise you are "Buying" a depriciating asset.
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