Special Labor Day Car Edition: Should You Buy or Lease a Car?
- Here’s why this Labor Day is the prime time to look into your next car. This secret means you can save potentially thousands of dollars on a 2018 model.
- My quick takes on the advantages and disadvantages of buying or leasing a vehicle to help you with your next car purchase.
As some of you may know, I love cars.
As a kid, I subscribed to Motor Trend and Car and Driver magazines. Each month, I looked forward to reading the famous head-to-head car reviews.
To this day, I love going to car shows and keeping up on the latest designs and innovations in the auto industry.
And it’s one reason I’ve always owned my own cars.
I prefer financing over leasing, because once a car is paid off, it’s yours to do with as you please. You can drive it for years with no monthly payment (except for maintenance costs), sell it at any time or trade it in for another vehicle when the time is right. In short, it’s an asset.
Also, there are no restrictions on the number of miles you can drive. Plus, you can modify the car to your liking.
Now, there are good arguments for leasing a vehicle, and I’ll get to them later. But if you’re like me and you prefer to purchase your own car, the upcoming Labor Day weekend provides an ideal opportunity to do so.
In fact, if you’re in the market for a new car, this year may prove to be the most cost-effective time to buy than any other decade.
According to a recent CNBC report, car dealerships are overrun with cars from not just 2019, but also 2018.
According to J.D. Power: “A full 3.5% of all July’s new car sales were 2018 model years. That means roughly 49,000 of the 1.4 million new cars sold in the U.S. in July were last year’s models.
“It’s the highest percentage of older models of new cars since 2005 when J.D. Power first started collecting data. The percentage of new 2017 models that sold last July was 2.5%.”
And … “there may be another 30,000 cars from 2018 still waiting to be sold.”
The reason: Car dealerships need to make room for brand-new 2020 models, but these older models are clogging up available space.
So that means you can save potentially thousands of dollars on a 2018 model. I’ve seen firsthand how bargains like this can be had…
Buy Into the Labor Day Car Purge
One of my family members was in the market for a new car and visited a dealer on Labor Day. They were able to get $7,000 off the sticker price of a current-year model.
So, if you’re in the market for a new ride and hoping to capture a great deal, don’t let this weekend pass you by.
You’ll have multiple factors working in your favor, including the fact that the average interest rates for new car loans have now hit their lowest point of 2019, according to Consumer Affairs.
Even though I’m hyperfocused on technology and innovation as investment research director here at Bold Profits, I still get a thrill from visiting dealerships and negotiating good deals on a car purchase.
Apparently, I’m not alone. Per CNET, a recent study by Urban Science “surveyed 2,000 car shoppers and 200 dealerships and found Generation Z and young Millennials go to 3.8 dealers on average when looking for a car.”
So, if you’re in the market for a new car, here are my quick takes on the advantages and disadvantages of buying or leasing a vehicle:
- Driving a new vehicle with the latest safety and technology features for less money.
- Placing little or no money down on the lease purchase.
- Paying lower monthly car payments than financing (works well for expensive luxury cars).
- Incurring very low maintenance costs due to the new-lease factory warranty. Also, depending on the automaker, all scheduled maintenance (oil changes, etc.) are free during the lease period.
- Driving a brand-new car every three years or less.
- Paying sales tax on the monthly car payments (the part of the car that’s leased) and not the entire vehicle price.
- Benefiting from tax advantages as a business owner, if the lease is used for business purposes.
- Always having a monthly payment.
- Limited in the number of miles that can be driven per year.
- Repairing or paying for any aesthetic damage done to the vehicle before the lease expires.
- Facing expensive penalties for ending a lease contract prematurely.
- Any changes or modifications to the vehicle must be removed/reversed before returning it at the end of the lease.
- At the end of the lease, the vehicle is not yours. It’s not an asset and has no equity.
- Once the car is paid off, you own it. You may sell it at will and pocket the proceeds.
- Low- to zero-percent interest-rate loans available for those with a great credit score.
- No restrictions on the number of miles it can be driven.
- The car can be modified to your liking.
- Higher monthly car payments.
- Higher down payment at the time of purchase (in most cases).
- Maintenance and repairs can be expensive after the factory warranty expires (especially for luxury vehicles).
If you are considering financing a car, one of the first things to do is calculate the true cost of owning the vehicle. Edmunds.com offers a helpful tool that allows users to research the true cost of owning any late-model vehicle.
In addition, Kelley Blue Book has published its 2019 5-Year Cost to Own Awards list. This well-researched article highlights the best brands and category winners for 2019.
Good Luck With Your Next Car Purchase!
Purchasing a vehicle can be a significant financial life event.
The experience can be exciting and memorable. I wish you all the best with your future car purchases and a happy Labor Day weekend!
Until next time,
Director of Investment Research, Banyan Hill Publishing