Car Leasing
Tips for Buying a Car
1. Make sure you are selecting a vehicle that is right for your needs. 2. Access the worth of your old car-- whether you plan to trade it or sell it, your current car can be an important factor in your budget. If you sell your used car yourself, you will most likely get more $ for it than if you trade it in. (Don't dicuss possibly trading in your car until you settle on a purchase price with the sales person). 3. Decide whether new or used is best for you (a certified used car may be much cheaper than a new car- but if you get a rebate or cost break, a new car may be cheaper). 4. Consider whether leasing or buying makes more sense for you. 5. Research current interest rates at your local credit union and banks before you go to the dealer.
Depreciation
A decrease in the value of an asset with the passage of time due in particular to wear and tear.
Upside Down Loan
A loan is considered an upside down loan when you owe more money on the loan when the $ value of the item. A substantial down payment when purchasing a car will keep you from having an upside down car loan.
Kelly Blue Book (KBB.com)
Access actual prices people are paying for cars as well as whether manufacturer-to-dealer incentives are being applied to a particular vehicle.
Disadvantages of Leasing
At the end of the lease you will have to pay to fix any abnormal wear and tear on the car including scratches and dings. At the end of the lease you have to pay if your mileage surpasses the limit you have agreed to in your lease contract (approx. 15 cents per mile you exceed). You are locked into the lease for the specified term. If you break the lease by turning in the car early, you'll have to pay the remainder of the lease PLUS any termination fees in the contract.
Car Leasing Jargon
Capitalized Cost-- equivalent to the selling price Residual Value-- The estimated worth of the car at the end of the lease.
Open-End Lease
The leasing company estimates the depreciation cost-- which your monthly payments are based on, and at the end fo the lease it decides the exact cost of depreciation, and you pay the difference at the end of the lease. Can be VERY COSTLY.
Benefits of Leasing
Lower monthly payment than buying a car Much smaller down payments required, get to drive a new car every few years. Because you are always driving new, you will pay very little, if any, money for car repairs.
MSRP
Manufacturer's Suggested Retail Price The amount of money for which the company that produces a product recommends that it be sold for in stores.
Transaction Fee
Money a car dealership adds to the purchase price of a car that covers the cost for employees of a car dealership handling all sales paperwork and DMV's transactions dealing with the sale of a car.
Set a Target & Negotiate Hard
Set a target about 2% abobe the dealer's cost. Start bidding below your actual target and plan to wind up near that figure.
Closed-End Lease
Sets a specific amount for the depreciation cost you will have to pay.
Leasing a car
You are paying to use the car during its first few years You are paying for the depreciation of the vehicle while you use it