Buy or Lease
Buy or Lease a Vehicle? You Decide!
BUYING: Once you payoff your car loan, your car is 100% yours! You will be the registered and legal owner of the car. While making payments on your car loan, you may be creating equity in the vehicle. Equity is the difference between the current vehicle value and what you owe on the loan. Buying a car usually appeals to those who like to keep their vehicles for over three years.
TIP: It is better to take the manufacturer's rebate when purchasing a car rather than the lower interest rate the dealer may be offering.
| Dealer 4.9% | Credit Union 7.5% | |
| Vehicle Cost | $10,000 | $10,000 |
| Rebate | 0 | $1,500 |
| Amount Financed | $10,000 | $8,500 |
| Payment: | $230 | $206 |
| Total payback | $11,034 | $9,865 |
| WOW! A $1,169 SAVINGS! | ||
LEASING: Leasing a car is like renting it. At the end of the term of the lease, a balloon payment is due. A balloon payment is a part of the original sales price.
You have 3 options:
(1) pay the balloon payment in full and, in effect, purchase the vehicle
(2) return the car to the dealership (could be other charges due if mileage is over the agreed upon amount or there is excess wear to the vehicle)
(3) finance the balance due for another few years
The registered owner is the leasing company and you. At the end of the lease, you have no equity built up in the vehicle.
Generally, leasing appeals to a person who prefers a new car every couple of years, is used to a regular car payment, or perhaps could benefit tax wise from a lease.
People are attracted to leasing because monthly payments are sometimes lower than a traditional loan. However, did you know, that you will most likely pay 100% of the window sticker price or more? Think carefully before you get lulled into those "low monthly payments".
Whatever suits you best, your credit union is here to help. Please call or e–mail us with your questions and we can help you decide which way to go!
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