Monday, March 26, 2007
For What It's Worth: Buy or Lease
There's no doubt about it, one of the best things in life is getting a brand new car. But what makes more financial sense. For What it's Worth, 7's Craig Stevens looks at buying versus leasing.
WSVN -- No dents, no scratches and that new car smell.
Lowell Davis: "The reason why I like leasing is because you get a brand new car every three years."
But, for Lowell Davis, the decision to lease is going to cost him big time at the end.
Lowell Davis: "My commute is from Miami to Miramar, so the commute is a bunch of miles everyday. I believe it's 15 cents to 20 cents a mile that I'll have to pay as soon as the lease it up."
And that is one of the biggest financial pitfalls of leasing, according to 7 News Financial Expert Allie Jablon.
Allie Jablon: "Approximately 10 percent of Americans who lease their cars go over on their mileage. And on average, those 10 percent of people go over by about 5,000 miles per year, which, at approximately 15 cents per mile, adds up to over $2200 over those three years."
But Allie says that doesn't mean leasing is bad.
However, she says you have to know what kind of miles you'll put on the car and your credit score to make sure it's a good deal.
Allie Jablon: "If you’re looking to lease a car, and you have a high credit score, you’re really going to benefit from that because you can get a lower interest rate and perhaps no money down."
Plus, people who get a new car rarely have expensive repair bills because the car is under warranty.
But what about buying?
Allie Jablon: "The benefit to owing a car is that after you've paid off that auto loan, whether it's three or five years, if you decide to keep the car after you've paid it off, you’re now driving a car without a payment."
Buying is also for people who want to customize their car or for those who drive a lot of miles.
The downside: It's an investment that depreciates quickly.
Allie Jablon: "The moment you buy a new car off the lot it depreciates in value about 20 percent."
Allie says there is really no right or wrong decision when it comes to buying or leasing.
Allie Jablon: "It really depends on what's important to you and your lifestyle."
For Lowell, leasing works because he just doesn't want to have to worry about maintenance or anything.
"The way I look at it, if you want to get rid of a car, and you want to have a short term lease, I don't feel owning a car is worth it."
Craig Stevens: "Here's how it breaks down: In the short term, leasing is going to be less expensive. But, in the long term, buying is a better deal. As long as you pay it off quickly and drive it for a couple of years after you do."
FOR MORE INFORMATION: