M11: Purchasing and Leasing Vehicle

• Do you want to exchange your old car for a newer one? Are you tired of having to depend on friends and family to get places? Whatever your reason for looking for a new or used car, it's important to keep a car budget in mind.
• Purchasing a car may seem out of reach because cars are expensive items. One way to help individuals afford a car is through financing, and taking a car loan. This allows you to pay for a car by making smaller payments over a period of time, rather than in one single payment.
• When financing, the first thing to look at, is the purchase price of the car. Often, a percentage of that price, which is the down payment, must be paid and the amount financed is the remaining amount.
• a vehicle is when you pay cash for a car and own the car immediately, or you pay a down payment and a monthly payment to later own.

  Buying
• On the one hand, buying involves higher monthly costs, but you own an asset-your -vehicle in the end. On the other hand, a lease has lower monthly payments and lets you drive a vehicle that may be more expensive than you could afford to buy, but you ger into a cycle in which you never stop paying for the vehicle.
• PROs of Buying


  No Restrictions

  Total Control

  Long-Term cost
• CONs of Buying


  Rapid Depreciation
• Unlike leasing, you’re not obligated for fees related to mileage and wear and tear on the car. Since you own it, you pay for service and repairs on your own time line.

  No Restrictions
• You also have complete control over how you improve your car or for instance modify its appearance. If you financed its purchase, once that load is paid off, you can keep it until it dies, trade it in , sell it outright or give it to a family member. You ger to decide.

  Total Control
• It’s cheaper overall to buy a car and hold onto it for as long as possible.

  Long-Term Cost
• New cars can lose 15%–25% of their value in the first five years of ownership. If you consider your car an investment, then this is a disadvantage. However, if you are the type who buys and keeps a car for years, then it shouldn’t matter.

  Rapid Depreciation
• Car Budget can include:

  Car Payment

  Property (Vehicle Tax)

  Insurance

  Maintenance and Repair

  Parking
• The amount of the car payment varies depending on a number of factors, including the down payment, which is the initial amount you put toward the purchase price.

  Car Payment
• At the time you buy a car and each following year, you must pay this. When you pay the tax, you receive a sticker to put on your license plate as verification. It is illegal to drive a car without paying this tax.The more expensive the car, the more you pay in taxes.

  Property ( Vehicle Tax )
• is required by law in our country.

  Insurance
• To help keep your car running smoothly, perform regular maintenance. You will probably want to get your oil changed every three months or every 3,000 to 5,000 miles. Also keep in mind unforeseen costs such as a dead battery, flat tire, or failed transmission.

  Maintenance and Repair
• If you regularly drive to a place where you have to pay for parking, consider the cost.

  Parking
• Leasing is a contractual arrangement in which a company (the lessee) obtains an asset from another company (the lessor) against periodic payments of lease rentals. When you ___, you’re paying for the value of the car you use up during your term, plus interest. What’s left is known as the depreciated value of the vehicle.
• depending on the terms of your lease, you might have to pay out your first monthly payment, last monthly payment, plus additional fees .

  Beginning
• you’ll have to make your lease payment on the same date each month, plus any taxes that aren’t included in the payment amount. These may include insurance premiums, sales tax or maintenance costs.

  During
• if you don’t decide to purchase the vehicle at the end of the lease, you may face chargers for excessive wear, extra maintenance or excess mileage.

  End
• Leasing: On the plus side, its future value doesn’t affect you financially. On the negative side you don’t have any equity in the vehicle.

  Buying: The vehicle will depreciate, but its cash value is yours to use as you like.


  Future Value
• Buying: You’ll have to deal with selling or trading in your car when you decide you want a different one.

  Leasing: You return the vehicle at lease-end, payany end-of-lease costs, and walk away.


  Vehicle Return
• Leasing: If you end the lease early, charges can be as costly as sticking with the contract. On the occasion a dealer may buy the car from the leasing company as a trade-in, lettingyou off the hook.

  Buying: You can sell or trade in your vehicle at any time. If necessary, money from the sale can be used to pay off any loan balance.


  Early Termination
• Leasing: Lease payments are almost always lower than loan payments because you’re paying only for the vehicle’s depreciation during the lease term, plus interest charges (called rent charges), taxes, and fees.

  Buying: Loan payments are usually higher than lease payments because you’re paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.


  Monthly Payments
• Buying: They include the cash price or a down payment, taxes, registration, and other fees.

  Leasing: They can include the first month’s payment, a refundable security deposit, acquisition fee, a down payment, taxes, registration, and other fees.


  Up-front cost
• Buying: You own the vehicle and get tokeep it as long as you want it.

  Leasing: You don’t own the vehicle. You get to usit but must return it at the end of the lease unless you decide to buy it.


  Ownership
• Leasing: Most leases limit the number of miles you may drive, often 10,000 to 12,000 per year. (You can negotiate a higher mileage limit.) You’ll have to pay charges for

  exceeding your limits.

  Buying: You’re free to drive as many miles as you want. But keep in mind that higher mileage lowers the vehicle’s trade-in or resale value.

  Mileage
• Buying: You don’t have to worry about wear and tear, but it could lower the vehicle’s trade-in or resale value.

  Leasing: Most leases hold you responsible. You’ll have to pay extra charges for exceeding what is considered normal wear and tear.


  Excessive Wear and Tear
• Buying: At the end of the loan term, you have no further payments and you have built equity to help pay for your next vehicle.

  Leasing: At the end of the lease (usually two to three years), you can finance the purchase of the car, or lease or buy another.

  End of Term
• Leasing: Because you must return the vehicle in salable condition, any modifications or custom parts you add have to be removed. If there is any residual damage you’ll have to pay to have it fixed or you need to file an insurance claim and pay deductible.

  Buying: The vehicle is yours to modify or customize as you like, although doing so may void your warranty.


  Customizing
• A new or used vehicle is one of the most significant expenses individuals and families incur, other than housing costs. If you don't want to deal with an auto loan or you find it too frightening to save up for the full price of a car, you

  may want to consider leasing a vehicle. It is not for everyone.
• Vehicles, whether leased or financed, are considered a typical cost of many people. Leases often are cheaper in the short term, but in the long run, purchasing a vehicle is generally less expensive. Weighing the pros and cons will help you come to the decision that is right for you and your family.