April 27, 2009, 5:00 am

Why Buying a New Car When You Can Lease?

by: The Financial Blogger    Category: Personal Finance
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Before I start with today’s topic, I have to talk about my last experience in car dealerships. I decided to go with my wife so she can try a few cars. When we get in a Toyota dealership, nobody looked at us when we came. Then, I was looking at the Rav4; opening doors, looking at the trunk, my wife sat in the car… still nobody. So I go see the girl at the door and ask her for a car salesman. She looks at me without great enthusiasm and ask if I had an appointment (is it just me or the car industry is supposed to go sideways these days?). I told her that I was here to buy a car, not to take appointments. “Well we don’t have anybody available right now”

“Well I’m going to buy my new car elsewhere then!”.

I don’t know if it’s because we looked like to kids (jeans, sport top for my wife and leather coat for me….), but it was definitely poor client service…. I guess they are selling too many cars to care for the one they loose 😉

So, back to our main topic: I wrote yesterday about buying new instead of buying used. Today we are looking at buying new instead of renting… Great debate indeed 😉 So I decided to give my own reason why I decided to buy instead of leasing:

Financing opportunities

As I previously mentioned while I discuss the difference between buying new or buying used, car financing opportunities are very generous these days. It appears that carmaker realized that managing leases become a pain when people are giving away their car instead of buying it at the end of the term. Therefore, they can’t concentrate on making, advertising and selling cars, they have to manage a huge amount of used cars as well.

Less restriction

I remember when I leased my Mazda; I couldn’t take the insurance I wanted (they usually require a $500 franchise but insurance premium becomes way cheaper for a $1000 franchise). Between you and me, below 2,5K I would simply pay it and not even bother claiming it… the consequences on your insurances is too high to claim such small amount. On top of that, you are restricted in term of mileage. You never think you would drive that much, but it always come down that you have to pay an extra fee for mileage.

Leasing is really expensive!

As I said, I started to lease my Mazda before buying it. At the end of the term, I had the chance to pay $2,000 in penalty or buying the car for another 13K. I paid the 13K from my investment and I was done with my car payment (it’s been 2 years in a half now :-D). However, if I would have take another car on a lease contract, I would keep paying the $300-$400 a month on top of having my insurance premium increase (since the car is new, it has a much bigger value!). Leasing is good for company because it is 100% tax deductible. For individual, this is definitely nice to get a new car every 2-3 years… but you are not saving a penny with this technique 😉

So I keep looking for a new car… I now added the Ford Sport Trac Explorer, the Ford Explorer and the GMC Acadia to my list of car to try… they offer much more space in the back for my kids!!!

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