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OTHER ITA SITES:
Should I Buy Or Should I Lease A New Car?
The problem: new cars aren’t always worth what you pay for them
You’ve just brought your new car from the salesroom. It’s great. It’s shiny, it simply oozes class and most importantly it has that new car smell. But as you drive off the forecourt, you’ve just thrown away $5,598.61 of your hard earned money. Annoying? Yes!
New cars are great, they are cheaper to run, they break down less, they look good and are very important when you’re meeting that new client or even if you just want to show off to your friends and family. They are however a substantial purchase that loses you money from the beginning.
Although it can vary between models, losing out to depreciation is inescapable if you buy new and starts from the moment your ‘new car’ turns into a ‘used car’ as you drive off the sales forecourt. Typically a new car loses 25% of its value even as soon as it is driven home from the salesroom, so on an average car purchase*, the buyer instantly loses $5,598.61. The car will continue to lose value at a frightening pace, until three years in, when the value begins to start dropping at around 6% per year. On average over the initial three years after purchase, a new car will lose around 50% of its value although some cars can lose a whopping 75%.
What can I do?
It boils down to three options: buy a used car: lease a new car: or walk!
If a new car is what you really want, leasing is becoming the chosen option for many people who are unwilling to lose money to depreciation.
Car leasing companies charge you a fixed monthly price based upon what they think the car you borrow will be worth at the end of your contract. Their customers only pay for the depreciation on a car. Over the lease period this can allow you to drive a new car without losing a significant amount of money through depreciation.
A new car
(For a ‘typical car*’ the Ford Focus has been chosen as a good mid-range option at $24,265.16, 5.9% APR is Ford’s typical rate [www.ford.co.uk])
Purchase price = $24,265.16
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