Before you purchase or lease a vehicle, you need to know what the federal and state laws are. So, review those laws because they can greatly affect the leasing and financing process associated with purchasing a vehicle. The laws provide the consumer with vital details that will help in the negotiation of a better deal. It will also let you know what your rights are as a consumer.
The Amount You Spend
The amount you spend will depend on what you are able to afford. Prior to leasing or financing a vehicle, you should assess your finances. Can you afford to spend a certain amount? What are your living expenses each month? Is it close to what you make on your job? If you find that your income is barely enough to pay your monthly expenses, then you should hold off on buying or leasing a vehicle until you are able to afford it. You should take time to cut back on certain expenses and possibly save up more money to put down on a vehicle. You should only lease or finance a vehicle when it is affordable. In considering your monthly premiums, can you really afford to spend that amount each month in addition to what you are already spending?
Negotiating the Price
The amount that you will end paying for a vehicle depends on several factors. One of them is the negotiated price of the vehicle. Another is the APR or annual percentage rate, which you might be able to negotiate. The terms and length of the contract is also one of the deciding factors.
If you cannot afford to, don’t take on any additional debt, especially if you are spending more and not less. So, think carefully about taking on any additional debt because if it interferes with saving for an emergency fund and other priorities, then you have to put the brakes on. Instead, it is best to save up for that down payment on a vehicle or you should consider a trade-in of your old vehicle. This can greatly reduce the money that you would be charged for the monthly premium.
When you purchase a vehicle and the balance is more than the market value, your vehicle will have negative equity. This is something that you should avoid. Therefore, when you trade-in the old vehicle and/or make a down payment, it helps to take care of the negative equity. In addition, when your contract has a longer term period, it lengthens the time that you will pay off the vehicle and also lengthen the time before you will see positive equity. Therefore, it is best to ask for a shorter contract term and make a larger down payment. The dealer can add the negative equity to the new contract. How? By increasing the finance amount, but this will be a higher amount owed on the vehicle.
Leasing a Vehicle
Last, but not least, you have more restrictions when leasing a vehicle. You have to use the vehicle for the number of mileage and months agreed upon. At the end of the lease, you can take back the vehicle, walk away from any future deals and pay the fees and charges associated with the leases terms. You also have the option to purchase a vehicle on finance terms or lease another vehicle. If your old lease was ended early, you may be charged early termination fees, which could be huge. Yes, the monthly lease payments will be lower than the finance payments on a similar vehicle. However, when the lease ends, you have to return the vehicle, if the lease agreement doesn’t give the option to buy it. Unlike the leased vehicle, when you make the final payment on a financed vehicle, you get to keep it, even though; both the leased vehicle and financed vehicle have depreciated in value. With a leased vehicle, you have to pay for the expected depreciation of the vehicle during our lease period.
The Bottom Line
Your best option is to look at your current and short term situation, which will be one of the factors in helping with your decision, whether to lease or buy. Your current situation may mean monthly expenses, debt and income.