The Advantages of Buying

If You Can’t Afford It, Don’t Pretend to Own It

Personally, I think Suze Orman had it right when she said, “There’s a reason they call them luxury cars; they should be for people who actually have the money to afford that luxury.  If you need to lease a luxury car, that’s a pretty good sign you can’t afford it!”  A car is a status symbol for many of us, and there can be a lot of pressure to keep up appearances. YOU must decide if that kind of status is worth the risk of living outside your means.  No one ever wants to downgrade from fancy to average, so be careful!  Leasing a luxury car could put you into a vicious cycle of high monthly payments that will never lead you to owning your car outright.

Will Your Life Change Over the Next Few Years?

Once you are locked into a car lease, they are very sticky – difficult and expensive to get out of.  If you are signing a contract for a 3 year lease, are you certain that your life won’t change in any big way over the next three years?  I ask because car leases have very specific mileage specifications – if you go over the allotted mileage, you will start to incur costly overage fees.  Most young people I know do not have absolute visibility of what the next 3 years of their lives will be like.  If the recent economic downturn has taught us anything, it’s that we are all not as safe and secure as we thought…

Let’s say you lose your job, or you get a new job with a much longer commute that has you driving over your mileage limit?  Or if you have a baby and need a different kind of vehicle? Or what if you get divorced and move? Or an unexpected family illness changes your driving patterns?  All of these common life changes can add up to lots of extra money spent on excess mileage charges and early termination fees if you are leasing.

Short Term vs. Long Term

According to Leaseguide.com, “The long-term cost of leasing is always more than the cost of buying, assuming the buyer keeps his/her car after loan end.”  So, if you are looking at your finances over the long-term, it will be cheaper for you to buy a car and drive it for many years.  People who purchase cars generally finance them for 5 years, according to Randy Gordon of RPG and Company, a brokerage firm which represents the consumer in auto transactions.   So after the 5 years are up, you own your vehicle and are free of car payments!

For those of you with enough money saved up to actually purchase a car outright for cash (without needing financing) and drive it for ten years, you are way ahead of the game, Gordon advises. Of course not everyone can afford to do this. But – if you do have money saved up, you will come out ahead long-term by purchasing a car you can afford outright, rather than leasing a fancier car you can’t afford to actually buy.

All Charged Up

If you don’t keep your leased car in pristine condition you will get hit with a heavy cleaning/repair bill at the end! And all those “lease-end” charges for damages can really add up!

At the end of the day, you have to decide whether leasing or buying a new car is personally right for you.  If done for the right reasons – and you can afford it – leasing may be the way for you to go.  We would caution you to be wary of leasing just because you are suffering from what Suze Orman calls, “Status-Symbolitis”.  My Fab & Fru gut is much more comfortable owning my wheels.  I ‘d much rather avoid the hassle of restrictive contracts for a car that’s out of my price range anyway.  Even though I’m not cruising around in a Maserati, I love having the freedom to drive my 5 year old, fully owned car as much as I want – and to not freak out about the dings, scratches, melted crayons and splattered milk that my trusty vehicle has to contend with on a daily basis!
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**Thanks to: Mike Fratamico Vice President and CFO of Prevue Pet Products, Randy Gordon of RPG and Co., and Al Hearn of Leaseguide.com. If you live in the L.A. area, you can contact Randy Gordon at randy@rpgandcompany.com to see how she can assist you with your next auto purchase.

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