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Buying a Car 101 - Used Versus New Versus Leased

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You know having a variety of options is a positive thing when shopping for a car. However, while options give you flexibility and control over your purchase, they can also lead to feeling overwhelmed. It can be difficult to know you are making the most strategic decision with so many choices between buying a car new or used.

Add in leasing options and the opportunity for information overload increases. However, you can put yourself back in the driver’s seat by doing a little bit of prep work before making your decision. Here is an easy-to-follow roadmap of all your car-shopping options.

Option 1: Buying a Car New

Back then: No matter when you were born, buying a car new has always been considered an accomplishment. However, the way your grandparents purchased a new vehicle is much different than how you will go about this transaction! Back in the old days, you could walk into a car dealership with a suitcase full of cash, shake hands with the salesperson and drive off the lot with your shiny, new family car.

Today: Now, you have so many more options than your grandparents did. In fact, you never need to leave your home to shop for your new vehicle: Delivery options are available that will save you the hassle of heading to the dealership. If you work with a credit union that offers conceirge car buying services, that will make the experience even easier.

Pros of buying new:
  • Warranty: This covers unexpected costs.
  • Top-notch performance: Good fuel efficiency is standard in many new cars.
  • New tech: Think of features such as built-in GPS, the ability to connect your phone and stop-and-go engine operation in heavy traffic.
Cons of buying new:
  • Insurance: New cars cost more to insure on average.
  • High up-front expense: The initial payment is usually higher.
  • Depreciation: New cars lose value at a faster rate than used.
Option 2: Buying Used

Back then: The used car salesman stereotype is as old as cars themselves: A deceptive salesperson tries to part you from your hard-earned cash, incessantly grilling you to agree to buy.

Today: It’s true that you had to be cautious when buying a used car years ago, but today you have so much more control over the process. Technology has made tremendous advances to help us navigate the used-car-buying market. For example, we can now look at the history of used cars online and decide for ourselves if the price is right, making it a fairly safe and convenient purchase.

Pros of buying used: Cons of buying used:
  • Fuel efficiency: The performance isn't as top-notch, including fuel efficiency.
  • Older features: Safety features and technology won’t be the best available.
  • Choice: You’ll have fewer options to choose from on the lot.
Leasing 101

A car loan is a classic way to purchase a new or new-to-you vehicle. You pay an agreed-upon amount of money each month, and eventually, you own the vehicle.

However, leasing has become a popular option. Car prices are increasing, and many shoppers are choosing to lease in order to get the latest and most technologically advanced models. When you lease, you make a monthly payment for a set term, and then return the car at the end of the contract. Think of it like renting an apartment: You don’t own the property, but you enjoy lower payments, regular maintenance and more.

Pros of leasing:
  • Lower costs: You'll pay less upfront.
  • Guarantees: You’re likely driving a new model that is covered by a manufacturer's guarantee.
  • Freedom: When you return the car, you have the option to choose another make and model.
Cons of leasing:
  • Insurance: Higher insurance costs come with leasing.
  • Monthly payments: Unlike buying a car, you are not building equity but instead paying every month.
  • Damage costs: If you don’t maintain the vehicle, you’ll pay extra for wear and tear.
Making Your Decision

Now that you have a roadmap of your car-buying options, it’s time to consider your choices carefully. This decision is personal: It depends on you, your driving habits and your budget. For example, what works best for the individual might not work well for the family.

Take advantage of the financial tools available to you, such as this lease-versus-buy calculator. Plug in a few numbers, such as the purchase price and down payment, and you can calculate the differences between leasing and buying a car. In fact, there is a whole host of calculators to answer your various financial questions, putting you back in the driver’s seat.

Need Advice?

When buying a car becomes overwhelming, it’s important to reach for a helping hand. Power Financial Credit Union can help support you, no matter what you choose while searching for a car. With almost 35,000 members, we can help you turn your financial goals into a reality. Contact us to receive personal help with your unique financial situation.