The Muscle Couple has lots of experience with regard to this topic.

Should you Buy or Lease Your New Car?

Always Utilize the 12 Golden Rules When Buying a New Car!

It’s been debated ad infinitum by people from all walks of life.  There are many angles and even more differing points of view.  We’d like to discuss the best option relative to your own personal situation.  There is no right or wrong answer when it comes to deciding on how to acquire a new or used vehicle.  But there are some powerful guiding rules anyone can use in effectively negotiating the transaction.

The Muscle Couple is offering a “cheat-sheet” to  use whenever you enter into a car transaction over the course of your life.  We would hope you familiarize yourself with these “12 Rules” and allow them to be the basis of your negotiating strategy.

Rule 1-Buying a Brand New Car is a TERRIBLE INVESTMENT. If the goal of investing is ROI, purchasing a New Car is a dead loser.  Driving off the lot with a Brand New Car depreciates it’s value by more than 20% instantly.  In today’s economy where gas prices fluctuate dramatically, cars can depreciate by more than 50% in less than 18 months.  A car is a 24-7-365 Depreciating asset. Understand this always.

Rule 2-The Smartest Way to Buy a Car is to purchase less than a year old and avoid the Depreciation. Understanding rule #1, you will avoid 35% of the total depreciation on a car assuming a 5 year ownership life cycle.

Rule 3-The “Cheapest Way” to Acquire a New Car every 2-3 Years is to Lease.(Assuming you have Credit worthy of the Lease Program)-Many people are confused and brainwashed into believing Leasing is a bad idea due to lack of equity(Ownership)in the car.  It’s actually simple math.  Most New Cars today come with Free Maintenance and Warranties up to 60k.  Leasing a car over a normal 3 year term will give you anywhere from 36-45k miles per year of hassle and worry free maintenance.  The cost of the lease is only the Acquisition Fee+Monthly Payment x Term +Taxes. If you compare a 3 year lease versus a 3 year ownership program it will 9x out of 10 be cheaper “all in” to lease then it will be to own.  And most importantly should you take care of the car and return it in good condition, you can move right into a new car without the hassle of being stuck with the depreciation if you owned it.

Rule-4-NEVER-EVER Enter into a Car Negotiation without Doing Your Homework Online. Anybody with a computer can research their entire car transaction from start to finish online.  You can pick every option, and configure the financing-fees and monthly payment of the car of your dreams before ever setting foot in the place of transaction.  There should never be any reason that your trip to a dealership is painful.  There are a Hundred sites you can get valuable information from before starting your transaction.

Rule-5-Always Know Your Composite Credit Score before beginning any negotiation with a Dealer or Lender. If you don’t know your credit score/worthiness, you are a sucker and you are asking to be taken to the cleaner upon trying to negotiate.

Rule-6-Research the Financing Programs-Rebates and Discounts offered by the OEM/Seller.  More of Rule #4.  Due to the depressed Car Economy, there has never been a better time for incredible discounts and incentives from the car Manufacturers.

Rule-7-If you absolutely must Test Drive a Car due to an impulse moment like driving by a Dealership and seeing a new BAD ASS SLED, tell the Dealer/Sales Person exactly this: “I WANT YOU TO KNOW I’M NOT BUYING THE CAR TODAY, EVEN IF YOU GAVE IT TO ME FOR FREE”.

Rule-8-If you are planning on trading in your Car as a downpayment on a newer one, for Zod sakes, research your cars Trade In Value first on the following sites www.kbb.com, www.edmunds.com, www.nadaguides.com. Take the lowest “wholesale price” and subtract $2k from that number and realize that’s what the Dealer is likely to give you as the value for your vehicle. Use this cost as leverage in your transaction. <IMPORTANT NOTE>You will always get more money for your current car if you sell it to a PRIVATE PARTY than you ever would from a dealer/wholesaler.

Rule-9-ALWAYS KNOW EXACTLY WHAT YOUR “ALL IN” OUT OF POCKET DOWNPAYMENT IS before considering any transaction.  Ex.  $3k is your Maximum Downpayment.  Have the Dealer/Lender quote you programs offered to you in writing(both Lease and Purchase) that shows your payment options with all the math and terms fully transparent.  Never spend more out of pocket than this number.

Rule-10-Never Lease a Car Longer than 36-39 Months. The math can get technical when trying to understand Bank Rates-Moneyfactors and Residual Values.  Just know that a normal Leased Car has about 45k miles of life expectancy before repair cost dramatically increases.

Rule-11-If You Do to Decide to BUY A NEW CAR and FINANCE IT OVER 5 YEARS, make sure you know you will drive the car for as long as it takes to put yourself into an equity position. This will vary based on a number of factors but remember depreciation is greatest in year one.  For most 5 year financing plans, you should be about equal to your remaining financed balance 4 years into the term.(assuming no accidents and the car is taken care of-It’s Our Opinion that you shouldn’t finance a car purchase for longer than 5 years due to Warranty Expiration and Repair Costs)

Rule-12-Contact Jay when in doubt over any of this and ask him for his professional opinion relative to your individual situation.

Acquiring a new car can be a very daunting and stressful task.  Don’t let it be.  Be informed and master these rules before starting your shopping.

If you use these rules as “guiding principles” when initiating and  negotiating your transaction -you will ensure the entire process is smooth and as stress free as possible.

Good luck!

MIHWCS