What you need to know about leasing or financing a car
Walking into a car dealership is always intimidating. Right when you take your first step in there, you’ll be attacked by several sales associates asking you what you’re looking for. If you’re unexperienced in the art of buying cars you will most likely get sharked in some way. My goal is to provide you a summarized and straight to the point guide on how to lease or buy a car.
Since this is a little related to this topic, if you need help with managing expenses read this article here.
The first steps
The most important thing you can do for yourself is to have an idea of exactly what you want. This can be easily done by doing your own research at home. The least you can do for yourself is to know the make and model of car you want and your budget. The next thing you need to do is figure out where you are going to purchase or lease your car. If you’re planning on financing or leasing your car, you should also have an idea of what your credit score is. This will greatly affect the interest rate you will receive if you finance and your lease payment if you decide to lease.
Financing and Leasing
If you are financing (another word for buying a car with a loan) or leasing a car your best bet is visiting an authorized dealership or Carmax. Authorized dealers will be able to offer you promotions, decent interest rates if you finance through them, and great deals if you buy multiple vehicles from them over the years.
Your first step is to negotiate down the price of the car. If you go to an authorized dealer, such as a Honda or Volkswagen dealership, you can ask for the dealer invoice to see what your dealer paid for the car themselves. Sometimes the dealer won’t provide it, but if they do it should have the manufacturer’s logo at the top and will be addressed to the dealer. It should also have all the factory installed options with the invoice price of each one to the next of it. If they do not provide this document, expect the average mark up for the vehicle to be around $4,000. If you can get anywhere between 2,000 + off the price of the car you’re doing a great job.
Your goal is to always get the best interest rate possible. For those who don’t understand interest rates, it’s the amount you pay along with the price of the car. For example, if the purchase price of your car is 25,000 dollars, your interest rate is 4% and you’ll pay it off over 5 years your monthly payment will be $460 a month. So, you’ll be paying a total of 27,600 over 5 years. If you want to play with some numbers here is a lease calculator and a financing calculator, if the links don’t work do a quick google search to pull up some different ones.
The payment system works the same for a lease, but typically a lease will only last around 3 years and doesn’t have an interest rate included. You will pay a lower monthly payment on a lease with the option of buying the car once you are finished with the lease. The buy price of the vehicle will be the original price of the car minus the payments you made of the term of your lease. So, if you like the car you leased it’s a good idea to think about purchasing it if you’re able to afford it. Also remember to never put money down on a lease!!! Have an idea of what you would like to pay and sit at the dealership until you get what you want or close to what you want.
Also, in terms of addons, don’t purchase any unless you can afford them and can’t live with out them. Use common sense when it comes to this. The only one I would recommend is GAP insurance, where if you get in an accident the insurance covers the “gap” between the amount owed on the car and the car’s actual cash value. GAP insurance can also be negotiated.
What’s Better, Leasing or Financing?
This is completely up to you. Remember, leasing is cheaper than buying a vehicle. So, if you are looking for a cheap way to have a vehicle to drive you should explore leasing a vehicle. If you can afford to finance a car this is a better option since a lease has mileage restrictions where you can only drive a certain number of miles on a yearly basis. The average mileage restriction is around 12,000 miles a year.
For example, I leased vehicles while I was in college and never put any money down. When I graduated college and started making decent money, I decided to buy my leased car since the lease payments I had made brought down the purchase price of the car.
How car salesmen negotiate.
It’s simple, they make you wait at their desk for an eternity and act like they are giving you the best deal possible even if it’s one you aren’t happy with. Trust me when I say that all you have to do is tell them that you can’t take the car unless the payment, if it is a lease, or price, if you are buying the car, is around the amount of what you want it to be at. A car dealership will do whatever they can to make sure you leave with a car. I’m not telling you to ask for a $20 dollar payment on a brand-new Honda civic or to ask for 10,000 dollars off on a new range rover. In other words, be reasonable, and do your own research to figure out what kind of deal you can work out with a dealership.
If they don’t budge, don’t be afraid to walk out of the dealer all together and leave a form of contact information with them. I guarantee they will eventually call you with a better deal. If you have any more questions on this topic feel free to comment or to email thedailynook@gmail.com