Buy or Lease: What’s the better option?
BIRMINGHAM, Ala. (WBRC) – It is not a good time to buy a car, with one expert calling it one of the “worst times” in recent memory.
“Right now, you’re just facing almost a tsunami of bad experiences that are all conspiring to make a painful process to buy a new car, or even buy a used car at that matter,” said Jonathan Linkov, Deputy Editor, Consumer Reports.
To ease the pain, Linkov said start your planning as early as possible.
“Can you continue to maintain your car a little bit longer, six months, one year? Oftentimes, if you’ve paid off a loan on a vehicle, and you have an older car, it’s much more advantageous to maintain it by doing the breaks, maybe even doing the timing belt or the water pump to give you an extra year or so with that vehicle, because if it’s in great condition, don’t get rid of it right now.”
He continued, “Now, if you’re in a situation where you’re saying my lease is coming up, or my car is so old I need something new, start your research in advance and figure out your budget that you really want to spend. And also, if you’re getting a used car, look at the budget with repairs and maintenance. With a new car, figure in also the loan price, etc. registration costs, taxes because those are going to be much higher than you’re going to be paying on your current used vehicle.”
Typically, cars are a depreciating asset, but over the past few years, used car prices have soared. According to an analysis by Experian, the average monthly payment for a used vehicle jumped from $397 in 2019 to $515 this year. CoPilot research shows people are paying about $10,000 more for used cars than if prices were normal.
“While it might be distasteful to spend a lot more money than you would think a used car is worth, if you’re buying one that has solid records, if you’re buying one that has good reliability history according to Consumer Reports, if you’re buying one, maybe it’s from a dealership and has an extended warranty, or some kind of warranty that’s remaining, that’s definitely going to serve you well in the long-term.”
Before you buy a used car, Linkov said do some research. Start by searching service records for the car you’re interested in, check its VIN on the National Highway Transportation Safety Administration website for recalls, and take it to a mechanic for a pre-purchase check.
“You can have a vehicle that has 100,000 miles. But if it has a stellar reliability for that year, it’s the wear and tear and maintenance that you have to worry about, not necessarily whether it’s a bad vehicle,” said Linkov.
If you’re interesting in buying a new car, Linkov said beware most dealerships are carrying the most expensive options on their lots right now.
“Because that is where they are making more money on them. So, if you do want a lower price, entry level, base model, the second model, you do have to order.”
Linkov said that could take at least a month.
“That goes back to making sure you plan ahead.”
As far as leasing, Linkov said be prepared to pay more than usual.
“In general, all the reasons a lease is not a great deal in normal pre-Covid times, are a little exploded at this point, to a larger scale. You don’t have an asset after the lease period is up, you’re renting the most expensive part of the vehicle, the initial depreciation, right now, vehicles area depreciating a significant amount, but you’re spending more to begin with, so that’s not to your advantage at all,” said Linkov.
Perks of a lease include: getting a car with the latest technology and safety features. Linkov said it’s a good option for people who like having a new car every few years. Considering everything though, Linkov said buying – new or used – is the better option.
“Ownership is a higher hurdle to start, but it’s much better in the long term.”
Subscribe to our WBRC newsletter and receive the latest local news and weather straight to your email.
Copyright 2022 WBRC. All rights reserved.