The following article is from the latest edition of LGA’s financial newsletter, “What Would Jeff Do?,” written by Jeffrey Levine, CPA, MST, our Director of Financial Strategies. If you have a general financial question for future newsletters, please submit them to Jeff. Enjoy this article? Subscribe to the newsletter here.

A car is one of the major purchases in life and requires research and test drives to find the perfect fit. But what about the financial transaction?

The Usual Options (no pun intended) Are:

  • Purchasing with cash
  • Purchasing with loan
  • Leasing

Leasing:

In general, leasing appears to be an inexpensive way to get into a new car, and, in some ways, it relieves you of certain maintenance or repair costs, as many leases build in free maintenance. Leases usually run for three to four years, so you know your projected costs for that period. Another benefit to leasing is that with today’s everchanging technologies, leasing a car means that at the end of your lease, you could end using that car and either purchase or lease a new car that could have substantial changes.

This is Advantageous to Someone Who:

  • Likes having a new car every 3 to 4 years (love that new car smell)
  • Lacks the funds for a down payment or sales tax related to the purchase
  • Drive in a way that reduces a car’s resale value
  • Uses the car for business and can deduct most of the costs

Instances When Leasing Is Ideal:

Technology should be considered. Electric cars are more common, and changes are happening rapidly. As we age, leasing may make sense. You might like the leasing to benefit from newer technology faster. Also, the older we are, the less likely we will be investing in cars over a long period of time. While someone in their teens or 20’s may be buying their first car and then buying 6 to 8 or more cars over their lifetime, someone in their 70’s or 80’s may be looking at the issue less often and a lease may be more fitting of their needs.

Buying:

This is Advantageous to Someone Who:

  • Likes to own a car for 6-10 years, or more
  • Treats the car well, maintains the car well
  • Does not like shopping for cars often
  • Does not use the car for business, would not benefit from deductions
  • Has the cash or can afford a loan to purchase the car

Benefits of Buying the Car:

  • Insurance and taxes will usually decrease the longer you own the car.
  • Ownership means you can customize the car as you wish, and benefit from owning with no payments for some period.
  • You don’t have to haggle with the car salesman as much.

 

Jeff’s Recommendation:

Jeff’s advice is to buy the car. While leasing may seem appealing, the cumulative cost of leasing new cars every few years often exceeds the expense of purchasing and holding onto a car long-term. If your financial situation allows, buying gives you more value over time.

LGA’s Commitment:

Navigating the best way to purchase a new car can feel overwhelming, but LGA is here to ensure a smooth and stress-free process. For personalized advice to help you explore the best options for your needs, contact us today. We’re here to help you make the most informed decisions for your financial future.

In any case, may you have many smiles to the gallon!