Finance or Lease a Car?

This is a short video on whether you should finance or lease a car.

Hi there today to talk to briefly about selecting the option to finance or lease a vehicle now to start there are certain questions that you shouldn’t have the answers to before you even enter the dealership and that’s how much you can put towards a car payment per month how much can you put down and how long you like for those monthly payments to continue what’s

That maximum amount that you’d like and always ask what is the price of the car and you should do this throughout the session because at dealership unfortunately that price can change so you just want to be conscious of what that amount is well to start you want to make sure you know how much positive cash flow you have available to put towards car payments so say

For this example it’s three hundred dollars you have twenty five hundred dollars saved up in the bank that you want to put towards the payment on also you don’t want to go any higher than five years of paying for the car and you have researched a loan and you know that you’re able to get a loan for 4.3 percent okay so that means that $300 x 60 months gives you

A cash total of eighteen thousand dollars over that five-year period that eighteen thousand plus the 2500 gets you to twenty thousand five hundred dollars and that is the amount of car that you can afford i looked up well what car out there is countable to that price and i don’t work for kia i don’t own a kia but but they make inexpensive cars so if that’s your

Buck if your budget is 20,500 then this is key you have this car that’s worth sixteen thousand eighty dollars now let’s look at that kia soul for leasing now to lease the car kit is offering the car for lease for 20 24 months if you were to pay 220 dollars per month along with a two thousand six hundred ninety nine dollars deposit well what does that mean so two

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Hundred twenty-eight dollars x 24 is equal to four 5472 dollars that plus the 2699 is eight thousand 171 dollars so that is the total amount that you would have put down for your monthly payments as well as your down payment okay so what does that mean so 8100 $71 / 24 months is equal to three hundred and forty dollars a month which is the same thing as saying a

Roughly eleven dollars and thirty-five cents a day so when you compare that to like car rentals it’s not a bad day to do that because you have enterprise that is charging or budget any of them is typically 15 plus dollars a day for compact car okay in my opinion the best use for lease is if your business on it why business owners we can deduct certain things you

Know in car payments is one of the things that you get ducked as long as your car is used in your business another reason to lease a vehicle is you just that type of person you want a new car every few years and the out-of-pocket expenses is not important another thing is you’re okay with the car and you’re able to stay within the annual mileage limit which could

Be negotiated at the time of signing um usually 70 12,000 miles depends upon the agreement and another component is that you’re able to keep the car in pretty good condition if you live in a neighborhood where it’s on the street and you getting dinks and stuff so it’s elyse be cognizant that that no mileage can cost you at the end of the lease whereas that 8100 $71

Can actually go up now what about the same car to be financed so at sixteen thousand dollars with a finance usually it’s a longer term so unlike the two-year span for the ohm release this one is hypothetically going out five years okay and you’re expecting you’re planning to pay just twenty five hundred dollars and deposit so the sixteen thousand dollars last year

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Twenty five hundred dollar deposit brings you down to 13 thousand five hundred dollars now thirteen thousand five hundred dollars over the five-year period plus your interest rate is equal to two hundred fifty dollar so you’re effectively paying 4474 dollars for the car which is the same as saying 291 dollars per month the difference is after 60 months you own the

Car so you can sell the car you keep the car give it away now the best use for finance in my opinion is that when you’re not a business owner so and you’re not able to deduct and your primary purpose for the car is personal use including commuting back and forth to work you also decide like you want to pay less not more in terms of a monthly payment you know so

Cost is important to you and the final reason for finances you actually want to keep the color you don’t want to sell the car ok so this chart compares the kia soul lease to kia soul finance the actual payment for the lease is 228 dollars the finance amounts two hundred fifty dollars your effective monthly payment for the car lease is 340 dollars while the finance

Is 291 dollars the total amount that you’ve spent for the car lease assuming that there aren’t any penalties for mileage or damage to the car is only eight thousand 171 dollars whereas for the finance is seventeen thousand four hundred and seventy four dollars the total amounts of having the car in your possession is only two years the finance you have the car

For as long as you want it you get to keep the car only in the case of a finance not the least unless you’re planning to buy the car off lease which can be significantly more expensive than if you had just brought it to finance as a finance to begin with so it’s usually not a good option to do now do you require additional money for another car if you lease in the

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Car after two years you typically need to lease another car or are you just not going to get another car but with the lease that may at a minimum mean if you do decide to get a car it’s another eight grand or more depending on if you’re planning to upscale the car and so on and so forth but what the finance you get to keep the car now the penalties for the mileage

Limit and damage like i said applies to elise only so in conclusion i do recommend that you prepare for your trip to the dealership and by that i mean know all your numbers not just a monthly payment amount know how much the car msrp is how much you plan to spend on it what other type of extra you’re planning and so on and so forth and if you’re financing shop around

Inquire with your bank or credit union they usually provide for better rates than the dealership and if you do decide to leave also shop around they are competing for your business especially around the holidays so see what options are available typically finding a lease with zero down is advantageous to you so that is definitely something you should discuss and

Negotiate but negotiate for everything including the mats good luck and happy hunting and if you do have any questions feel free to post them and let me know that’s it for now feel free join us on facebook.com slash folder business or twitter.com slash folder underscore business and we can also be found at boulder business consultants com hopefully this video helps you see you next time

Transcribed from video
Finance or Lease a Car? By Bolder Business