Buying My First Car!

image: According to the Department of Labor's Bureau of Labor Statistics, the annual cost of car ownership and operation is 17% of the average household's expenditures, ranking second only to the cost of housing There are many factors to consider when purchasing a car. Given the potentially significant costs, it is important to consider a wide range of factors when selecting a vehicle and determining how you'll pay for it. By learning about concepts such as trade-in and book value and knowing how to analyze dealer incentives, you'll be able to determine whether leasing or purchasing is the more sensible, cost-efficient method of obtaining a car.

Car Buying Basics

When it comes to buying a car, most people don't have enough money on hand to pay cash for the vehicle they want. Since this is a major purchase, you should look for ways to save money while still obtaining the car that best meets your needs. When purchasing a car, there are some terms that you should understand in order to get the most for your money and select the financing that is most cost-effective.

Buying A Car! Presentation

Leasing vs. Purchasing

If you've decided that it's time for a new car, you'll also need to decide whether you want to lease the car or purchase it. There are several differences between the two in areas such as ownership, maintenance, payments, and more; the chart below presents the pros and cons of each option.

Lease vs. Purchase: Pros and Cons

Lease

Purchase

Pros

Cons

Pros

Cons

Usually little or no down payment required
Fewer up-front, out-of- pocket fees (ex: sales tax)
Lower monthly payments
New car every few years
No chance of being "upside down," or owing more on the car loan than the car is worth
Allows you to have a more expensive car
Some dealers will cover regular maintenance
Tax advantages if used for a business

You always have a car payment
You never own the car
Mileage restrictions (usually 12,000-15,000 per year) and fees for overages (usually 15-25 cents per mile)
Higher insurance coverage costs
Charges for excess wear and tear
Higher credit score requirements
Depending on your state, you must be at least 18 to lease a car

You own the car after you make all the payments (usually 48-60 payments)
Can own the car for as long as you want
Can drive as many miles as you want
Insurance costs are usually lower

Down payment required
Up-front, out-of-pocket costs (ex.: sales tax)
Higher monthly payments
Can end up "upside down," or owing more on the car loan than the car is worth
Loan limits for the price of the vehicle (usually not more than $30,000 allowed)
Have to pay for vehicle maintenance

IMAGE CREATED BY GAVS