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Just because your savings account doesn’t have room for a Mercedes-Benz convertible doesn’t mean you have to forgo cruising topless (we’re talking about the car here). Having strong credit can help you fulfill that fantasy and indulge in a luxury car that you can’t actually afford to buy. Automakers know this and reward people with A+ credit scores by offering them decent interest rates and relatively low monthly payments. In short: You might be able to lease a BMW sedan for less than the monthly payments of buying a Honda Accord.
Lenders tend to be more finicky about who they approve for leases, and if your credit score is less than stellar, you’re labeled as a high-risk consumer. To protect themselves against extra costs of surpassing the mileage limits or too much maintenance, lenders are likely to hike up the interest rate, so you end up paying way more in the long run.
You need a new car, and the adorable Fiat is calling your name. The only problem: You’ve got baby on the brain. Fiat + car seat ≠ good idea. Think of leasing as your last hurrah before settling for something more permanent...like that minivan.
Leased cars have mileage limits--typically 10,000 miles a year, or less. Most of us drive 12,000 to 15,000 miles annually. If you live for road trips or have a long commute: buy. Otherwise you’ll spend the next two years as a slave to your odometer. With a leased cars, you can be charged as much as 30 cents per mile in overage fees. That can translate into a hefty bill at lease’s end.
A new car depreciates by 10 percent as soon as you drive it off the lot, and about 20 percent in the first year of ownership. So if you plan to trade in for a newer model in a year or two, don’t waste your money on a down payment. By leasing, you’ll pay only for the time that you’re actually driving--and you'll get the new techy perks to boot.
To get the most bang for your buck, keep your car for at least five years. Buying is best for those who aren’t big on change and foresee driving around happily once the car is paid off. Most new cars have a 36,000-mile warranty, so you should be able to drive without major problems for at least three years. Buying is a savvy financial choice because once you are done with the payments, the vehicle is completely yours. When you’re ready to upgrade, the car’s value can be used as a down payment for a new auto.
Those with a habit of buying and returning might want to lease, considering that a car is the most expensive purchase most people make (after a home). To avoid buyer’s regret--cue a smooth salesman who sells you a Maybach instead of a Civic--test out a car you think you’ll like. If you end up loving it, you can buy it at the end of the lease term.
The check-engine light has been on for months, and that squeaky noise just won’t go away. It’s official: Your sweet ride is on her last breath.
Now that you’re browsing for a new automobile, you might be thinking, Should I lease or should I buy? The whole lease-versus-buy conundrum can stump even the savviest shoppers. To clear any confusion, we talked with Tara Baukus Mello, auto expert at Bankrate.com, about the pros and cons of both options.
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