Consumer Services

Know Your Finances

Question:

When does the “greatest car bargain in the world” cease to be a bargain?

Answer:

When it exceeds your budget.

  • The Rule of Thumb is:

  • 1) Always focus on your bottom line and be realistic.
  • 2) Consider your payment options: leasing, paying cash, or financing.
  • 3) Take your time making your final decision.

  • Buying versus Leasing

  • You’ll probably want to buy if:
  • 1) You drive more than 15,000 miles a year.
  • 2) You want to own the vehicle.
  • 3) You plan to modify the vehicle in some way.
  • You’ll probably want to lease if:
  • 1) You prefer lower monthly payments and desire flexibility in designing a payment schedule.
  • 2) You want to put little or no money down.
  • 3) You like to drive a “new” car after two, three, or four years of operation.

BUYING

To be well prepared in this regard, you’ll want to put together a personal purchase plan. But before you start crunching numbers, keep the following in mind: your trade-in*, scheduled maintenance**, and consumer-elected options.

  • The next step is to determine exactly what you can afford in the way of:

  • Price of Vehicle***
  • Less Down Payment
  • Total Amount Financed (including sales tax)
  • Monthly Loan Payment/Interest
  • Length of Loan
  • Annual Percentage Rate
  • Include Projected Rate
  • Insurance

Using these figures as a guide, compute your Total Estimated Monthly Expense.

*Trade-ins have several pluses: you have one transaction and you save time, effort and advertising expense when you deal with a local franchised new car dealer. Also, you will save on sales tax because the trade-in is subtracted from the price of the new car before the sales tax is computed.

**Be sure to read your maintenance manual and warranty manual for schedule of servicing.

***Registration and inspection fees are not included in the price of the vehicle.

LEASING

Those considering leasing should also determine what they can afford on a monthly basis. By following the worksheet below, you will be able to come up with a rough estimate of what your monthly expenses may entail. Do keep in mind, however, the key word here is “rough,” as in no two leasing programs are exactly the same.

  • Capital cost reduction
  • (down payment, if applicable):
  •  
  • First/last deposit
  • (If applicable):
  •  
  • Monthly payment:
  •  
  • Multiplied by
  • length of Lease (in months):
  •  
  • Equals =
  • total vehicle payments:
  •  
  • Add projected monthly cost of
  • insurance monthly payment:
  •  
  • Using these figures as a guide,
  • this is your total estimated
  • monthly expense:
  •  
  •  
  • $__________
  •  
  •  
  • $__________
  •  
  • $__________
  •  
  •  
  •  __________
  •  
  •  
  • $__________
  •  
  •  
  • $__________
  •  
  •  
  •  
  • $__________
  •  

This worksheet does not include the car’s residual value (i.e., what it would cost to purchase the car at the end of the lease), nor does it allow for excess mileage. It further assumes that there are no “balloon payments,” and that all payments are equal through the term of the lease. Your dealer will be able to answer your questions on these details.

Additional considerations when leasing a car:

Early termination of a lease could involve certain costs. Under the terms of a lease agreement you may be charged for excess mileage. You must return the car to the designated drop-off point and you will be responsible for normal wear and tear.

Remember, as with the sale, registration and inspection fees are not included in the price of the vehicle.

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