December 8, 2006, Newsletter Issue #68: Comparing the Costs of Buying a New Car and Car Leasing
Tip of the Week
Most auto consumers are drawn to car leasing because it means that they do not have to pay for the new car or finance it. With leasing, the consumer is paying for the cost to drive the vehicle for a period between two to six years. (The term of a new car lease varies from contract to contract).
To evaluate the cost effectiveness of a new car lease calculate the following:
• The total initial payment (includes the down payment (Capital Cost Reduction) and extra fees
• Monthly payment amount
• The number of months in the lease's term
• Any additional charges at the conclusion of the lease
Review a monthly Automotive Lease Guide because it will depict charts on the Residual Percentage Guide, detailing an approximated value on various car models. In other words, these charts identify which vehicles are forecasted to maintain the best value. As a result, new cars with low residual value are more apt to be costly because they will drastically depreciate upon the end of the lease. Try to avoid low residual value new car leases.
Next, calculate the cost of financing a new car, down payment, monthly payments and any maintenance requirements.
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