Monday, May 16, 2011

Leasing vs. Buying a New Car: What to Know

Jill Cotter, Vice President/Lending,
Community Financial.
If you are looking for a new vehicle you may be torn between leasing or purchasing a new car. I know that everyone has different driving needs, but there are some financial costs and benefits to consider.

Leasing does offer several benefits. Leasing a car allows you to have a new, reliable vehicle which means less maintenance costs. Often your lease will last 2-3 years and you can change your vehicle at the end of the lease.

However, this option does come with limits. You are only using the vehicle, not owning it. Leasing sometimes requires a down payment and has mileage restrictions. You may end up paying extra on mileage or wear and tear fees. Repeated leasing can be more expensive in the long run.

Purchasing a car means you own your own vehicle. You have the freedom to choose any make or model. You will have a lower down payment and no mileage restrictions. Owning your vehicle means you can sell it for cash anytime.

Overall, it is typically cheaper in the long term to purchase a car. If you are okay with keeping your new car longer, you can lower those payments by financing it up to 84 months. Loans are a common route to financing a car purchase. According to cars.com, approximately 80 percent of auto consumers either pay cash or finance their purchase with a loan.

Interest rates for loans are a large factor that impacts buying and leasing costs. Today’s ultra-low loan rates, as low as 2.99% APR* at Community Financial Credit Union, make the difference in the payments between buying and leasing less of an issue. We all know the bottom line is – can I afford the vehicle? A credit union representative at Community Financial can run the numbers for you; they are trained to help you make the best decision for your situation.

*Consumer Loan Annual Percentage Rates (APRs) only available at Community Financial offices, the web or call center; not available through dealerships. *Quoted rates are based on 48 month term and include a .25% rate discount when payments are automatically deducted from your Community Financial checking account. New car loan payment example assuming: A $20,000 vehicle with 20% down, an excellent credit score, a 48 months term and a 2.99% APR would result in monthly payments of about $380.63. Rates vary and are dependent on individual credit history and other factors including: model year, loan amount and term.



Posted by: Jill Cotter, Community Financial Vice President / Lending.

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