{"id":1899,"date":"2021-09-10T14:04:19","date_gmt":"2021-09-10T18:04:19","guid":{"rendered":"https:\/\/www.skypointfcu.com\/wph\/workarea\/?p=1899"},"modified":"2022-03-31T11:14:03","modified_gmt":"2022-03-31T15:14:03","slug":"when-leasing-a-car-is-the-more-frugal-option","status":"publish","type":"post","link":"https:\/\/www.skypointfcu.com\/wph\/workarea\/blog\/when-leasing-a-car-is-the-more-frugal-option\/","title":{"rendered":"When Leasing a Car Is the More Frugal Option"},"content":{"rendered":"\n<p>If you need a car, the most frugal option is to buy one that\u2019s 2 to 3 years old, pay cash and drive it until the wheels fall off.<\/p>\n\n\n\n<p>The least frugal option traditionally has been leasing, where you make monthly payments to drive a car but don\u2019t own it. You\u2019re paying for the vehicle during its most expensive period \u2014 cars lose more than half their value on average in the first three years \u2014 and you have nothing to show for your payments after the lease ends.<\/p>\n\n\n\n<p>Few people opt for the frugal way, however, and car buying has changed enough that leasing may no longer be the costliest option. In some situations, leasing could be the most sensible.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Costlier cars, longer loans<\/strong><\/h3>\n\n\n\n<p>To understand why, let\u2019s survey the U.S. automotive landscape. Americans are:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Buying more expensive cars.<\/li><li>Financing larger amounts.<\/li><li>Taking out longer loans.<\/li><\/ul>\n\n\n\n<p>Americans increasingly opt for SUVs and trucks over sedans, then spring for higher trim levels and more features than in the past, says Ronald Montoya, senior consumer advice editor for car comparison site Edmunds. The average purchase price for a new car in November was $37,981 \u2014 $4,699 more than the comparable figure from 2014, according to Edmunds.<\/p>\n\n\n\n<p>Consumers stretch out their loans to get lower monthly payments; most buyers now opt for loans longer than five years. Even so, the average monthly payment is still a hefty $568, up from $492 five years ago. Leasing a similarly priced car would cost significantly less each month.<\/p>\n\n\n\n<p>\u201cYou could probably get something for about $400 a month leased, easy,\u201d Montoya says.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Lease vs. buy calculation<\/strong><\/h3>\n\n\n\n<p>On paper, buying still comes out ahead mostly because you\u2019ll own the car with some equity at the end of the loan. But such \u201capples to apples\u201d comparisons of a six-year car loan versus two three-year leases leave out a lot of important details, such as repair and maintenance bills.<\/p>\n\n\n\n<p>These costs tick up as a car ages, and warranties (which cover most repair and maintenance costs) usually end at three years. The expense normally wouldn\u2019t be enough to make leasing the cheaper option \u2014 unless people don\u2019t have savings and use a credit card or a payday loan.<\/p>\n\n\n\n<p>That describes a whole lot of people in the U.S., where 2 out of 5 adults don\u2019t have $400 to cover an emergency expense, according to the Federal Reserve. Plus, if you don\u2019t have money for a down payment, it\u2019s much easier to get a lease than a loan, Montoya says.<\/p>\n\n\n\n<p>Another issue is that new-car buyers often don\u2019t hang onto their vehicles long enough to get the most value from their purchase, Montoya says. Ideally, you would keep the car for many payment-free years.<\/p>\n\n\n\n<p>What about&nbsp;<a href=\"https:\/\/www.nerdwallet.com\/blog\/loans\/auto-loans\/buy-used-car\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">buying used<\/a>? That\u2019s still the most financially sound way to get into a vehicle since you\u2019re letting the first owner take the depreciation hit. It\u2019s less sound, though, when people finance the car with a long loan, as many do. The average used-car loan is 67.5 months, almost as long as the 69.3-month average for new cars.<\/p>\n\n\n\n<p>\u201cBy the time you\u2019re done with (the loan), it\u2019s a 9-year-old car,\u201d Montoya says.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>When leasing is best<\/strong><\/h3>\n\n\n\n<p><a href=\"https:\/\/www.nerdwallet.com\/blog\/loans\/auto-loans\/7-steps-getting-great-auto-lease-deal\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">Leasing<\/a>&nbsp;is usually better than buying when:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>You\u2019re affluent and want a new car every few years.<\/li><li>Money is tight and you need the predictability of a car that\u2019s under warranty.<\/li><li>You\u2019re acquiring a new electric vehicle, since the tax credits that encourage people to buy these cars new also contribute to faster-than-average depreciation.<\/li><\/ul>\n\n\n\n<p>\u201cIf you finance (an electric vehicle), you may end up underwater, owing more than the car is worth, whereas depreciation is already factored into the cost of a lease,\u201d says Jeff Bartlett, deputy auto editor at Consumer Reports.<\/p>\n\n\n\n<p>The most frugal way to lease is to avoid the temptation to upgrade, since the same payment already gets you a more expensive car. Instead, lease&nbsp;<a href=\"https:\/\/www.nerdwallet.com\/blog\/loans\/auto-loans\/much-spend-car\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">the same car you could afford to buy<\/a>&nbsp;and save the difference. You also can lease used cars at some dealerships or by using a lease-trading site.<\/p>\n\n\n\n<p>One way to combine the advantages of leasing and buying used, Montoya says, is to buy your car at the end of its lease. Ideally, you would do that with cash or a loan of three years or less.<\/p>\n\n\n\n<p>\u201cYou\u2019re the previous owner so you know how well it was taken care of, and you have nice access to a great used car,\u201d Montoya says.<\/p>\n\n\n\n<p><em>This article was written by NerdWallet and was originally published by The Associated Press.&nbsp;<\/em><\/p>\n\n\n\n<p><strong>More From NerdWallet<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><a href=\"https:\/\/www.nerdwallet.com\/blog\/finance\/how-to-actually-achieve-your-debt-payoff-resolution\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">How to Actually Achieve Your Debt Payoff Resolution<\/a><\/li><li><a href=\"https:\/\/www.nerdwallet.com\/blog\/loans\/auto-loans\/talk-yourself-out-of-buying-a-new-car\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">Talk Yourself Out of Buying a New Car<\/a><\/li><li><a href=\"https:\/\/www.nerdwallet.com\/blog\/finance\/how-soon-will-credit-recover-from-holiday-spending\/?utm_campaign=ct_prod&amp;utm_source=syndication&amp;utm_medium=wire&amp;utm_term=jsaenzmcefcu-org&amp;utm_content=723823\">How Soon Will My Credit Recover From Holiday Spending?<\/a><\/li><\/ul>\n\n\n\n<p>Liz Weston is a writer at NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.<\/p>\n\n\n\n<p>The article When Leasing a Car Is the More Frugal Option originally appeared on NerdWallet.<\/p>\n","protected":false},"excerpt":{"rendered":"If you need a car, the most frugal option is to buy one that\u2019s 2 to 3 years old, pay cash and drive it until the wheels fall off. The least frugal option traditionally has been leasing, where you make monthly payments to drive a car but don\u2019t own it. You\u2019re paying for the vehicle [&hellip;]","protected":false},"author":7,"featured_media":2049,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"","attr_excerpt":["The least frugal option traditionally has been leasing, where you make monthly payments to drive a car but don\u2019t own it. You\u2019re paying for the vehicle during its most expensive period \u2014 cars lose more than half their value on average in the first three years"],"footnotes":""},"categories":[3],"tags":[17,23,8],"class_list":["post-1899","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-finance","tag-auto","tag-purchase","tag-borrow"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>When Leasing a Car Is the More Frugal Option - SkyPoint Federal Credit Union<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"When Leasing a Car Is the More Frugal Option - SkyPoint Federal Credit Union\" \/>\n<meta property=\"og:description\" content=\"If you need a car, the most frugal option is to buy one that\u2019s 2 to 3 years old, pay cash and drive it until the wheels fall off. 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