CAR SHOPPING MADE SIMPLE
Every year around this time, millions of car shoppers get the urge to hit the showrooms. As with every big ticket item, there are a lot of financial and personal issues to consider before driving off in your dream car. To give us some pointers on whether to buy or lease, THAT MONEY SHOW invited Jerry Edgerton, automotive columnist for MONEY MAGAZINE, and author of CAR SHOPPING MADE EASY: BUYING OR LEASING, NEW OR USED. The following tips are excerpted from his discussion with our host, Betsy Karetnick.
A lot us are either buyers or leasers, and it's pretty easy to tell who's who:
LEASERS
If you normally get a new car every few years, if you take good care of your car, and you hate dealing with a used car, you might want to lease. A lot of people really want a new car every few years, so those people are better off leasing.
BUYERS
If, on the other hand, you like keeping your car a long time, if you love that day when the payments are over and you still have the car, you should probably buy. Buying is usually the better choice financially because, if you have a three- or four-year car loan, and you keep the car for eight years, you'll be free of payments for four or five years, but you're still driving the car.
NEGOTIATING
You know if you're buying a car that you have to negotiate the price. Leasers should remember to do the same. They can usually negotiate the capitalized costs -- the equivalent of the selling price. Getting that price down will lower the lease payments. Leasers need to know what the car is worth when its new, and what it will be worth when the lease ends. The dealer is required to provide those details, if asked. If the dealer isn't forthcoming with that information, however, go to another dealer.
Also, keep in mind that leases come with mileage caps, often as low as twelve thousand miles a year. If you go over that cap, you may have to pay a penalty. So if you're a regular commuter, and you expect to drive a lot, you may want to consider buying. It may also be possible to negotiate the mileage cap with the dealer before you've made a commitment.
KNOW BEFORE YOU GO
To find out as much information as possible before going car shopping, use an online research site such as Edmunds.com (http://www.edmunds.com/). It provides the sticker price, the dealer cost, and the true market value -- that's the average selling price of the car today. That's the price you want to aim for in negotiating the capitalized costs when leasing a car. If you're buying, that's the price you should be negotiating to pay for the vehicle.
Also, if you're buying, you should have arranged financing from your bank before you go car shopping. That way you'll have something to compare with the terms the dealer offers you. If you're prepared before you go, you'll get a better price.
