Should You Pay Cash, Finance or Lease A New Car? Expert Explains Which Is Best

paying cash financing or leasing which is the best option when buying a new car that's what we're gonna find out welcome to crop corner where we help you the consumer Master the process of car buying and car ownership with cars now more expensive than ever and more and more car payments reaching a thousand dollars per month it is now more important than ever to make sure that you're buying a car the right way so for this video I'm going to explain in a clear simple way the pros and cons of leasing financing and paying cash for a car and find out which one makes the most sense for you and finally I'm going to share some tips that'll help you save some money and not get taken by a dealer but before we get into it remember if you enjoy and get value of this video make sure to subscribe and turn on the notifications I post two videos a week always straight to the point valuable car buying advice designed to help you the consumer and a huge thanks to onvik Ontario's vehicle sales regulator for sponsoring a portion of this video so let's start this video off with the pros and cons of leasing now leasing can look like a really attractive option thanks to the lower monthly payments when compared to financing and the reason you get lower payments with leasing is because you're only making payments on a portion of the total price of the car or if you look at it another way you're only making payments on the car's depreciation for example if you're leasing a new car that costs say thirty thousand dollars you're only going to be making payments for three to four years on around 10 000 of that thirty thousand dollars which means that at the end of the lease you have a balance of twenty thousand dollars that you can either pay if you want to buy out the car or you can just return the car back to the dealership and start the process all over again pretty simple leasing is a great option for a short-term person the type of person that just likes to get into a new car every two to four years where you don't need to be concerned about spending a lot of money on maintenance or any money on repairs because the car is going to be covered by the warranty for the duration of the lease this makes leasing an ideal option for a lot of luxury cars which are often known for having heavy depreciation and also costing a lot of money and repairs after the warranty period leasing also helps you avoid being in negative equity where the value of the car is lower than what you owe depreciation really doesn't matter much for leasing because you can just return the car back to the dealership at the end of the term leasing is also good if you just need a transition car for around two to three years until you're able to get the car that you really want leasing is also a great option for a lot of business owners because you're often able to deduct lease payments as a business expense of course you want to talk to an accountant but this is another reason why a lot of people lease it also allows you to hold on to your cash and invest it elsewhere and not have a lot of cash tied up into a car and finally leasing a new car can be a good alternative to financing a used car especially if you're someone who doesn't have a lot of cash to spend on a car you need a low monthly payment and you need to buy a car right away well more often than not you can often lease a brand new car for a very similar monthly payment to an older used car say you have a budget of around 500 a month while leasing a brand new car complete with a full warranty and no repair concerns can often make a lot more sense than financing an older used car for the same amount a car that's not going to have any warranty protection is likely going to cost you a lot of money in repairs is going to have a much higher interest rate and by the time you're finished paying it off it is realistically not going to have very much life left in it between the two I would rather lease the new car now there are of course downsides when it comes to leasing number one there are restrictions when it comes to the mileage the amount of driving that you're able to do and also making sure that you're returning the car in great condition back to the dealership at the end of the lease another downside is that if you don't pay the buyout you're not going to have a car at the end of the lease which means that you're going to have to start the process all over again which keeps you in an endless cycle of payments and debts which is obviously not not the best and when you add up all the costs leasing usually does end up costing you more money in the end so if you're looking for a better long-term option let's move on to financing unlike leasing which is better for a short-term person financing is ideal for a long-term person the type of person that likes to hold on to their car for as long as possible when you add up all the costs between financing and leasing financing usually does end up costing you less in the end remember the best way to get the most value out of a car is to drive it as much as possible and to hold on to it for as long as possible so that your cost per mile or cost per kilometer is as low as it can be and the best way to do that and to get the most value out of a car is to hold on to it for as long as you can another benefit of financing is that there are far less restrictions there's no mileage limits condition requirements and you're not going to be locked into a term for a set amount of time financing gives you a lot more flexibility and just like leasing find financing allows you to hold on to your cash so if you're good at investing you can invest your money elsewhere instead of having it all tied up into a car now of course there are some downsides to financing the biggest one being is that you will have higher monthly payments because you are making payments on the total price of the car rather than just a portion of the price like you do with leasing now of course you could go with longer terms in order to reduce your payments but the issue of taking a longer time to pay off your car is that you could be a negative equity where the value of your car is lower than what you owe which is another major risk it's important to understand your rights and the risks that come with financing or even leasing so here are a few valuable tips from Avic Ontario's vehicle sales regulator the first important tip is that before you go to a dealership it's always a great idea to contact your own financial institution first so that you know your credit score and also know your financing options if the dealer is arranging financing for you then make it clear that you do not not want your credit checked by multiple lenders which can harm your credit score carefully review all the information on the application before it is submitted to make sure that everything is accurate with no errors you also need to know who your application was submitted to and ask the dealership about all the different offered terms and rates and only when you're happy with the rate all the terms in the contract and when you've read the contract very carefully only then should you sign the deal and if the dealership has made you any kinds of promises all those promises need to be written in the contract remember in Ontario after you sign a contract there is no cooling off period so make sure you're happy with the deal before you sign and when in doubt or to learn more about your car buying rights just visit the onvig website all the information can be found in the description box below and now let's move on to the third card buying option which of course is paying cash now paying for a brand new car in cash is obviously not something that everyone is able to to do but if you are able to do it there are a few obvious benefits you're not going to have any monthly payments you're not going to be in debt and you're also not going to be spending money on interest or any other borrowing costs which could save you a few thousand dollars if not even more of course when you're paying cash for a car you are tying up a lot of your money and that's money that could have been invested elsewhere so if you happen to be good investing it could be a lost opportunity if you pay for a car in cash this is why you have to look at each option really carefully and decide which one makes the most sense for you or perhaps use a balance of both like for example making a really large down payment on a car and only financing a small portion over a short-term loan so let's take a look at a quick example to see how this works in practice and also see how you can save yourself some money when negotiating a deal with a dealership let's take a look at this brand new Toyota Corolla LE as an example now it doesn't matter whether you're paying cash financing or Leasing when it comes to negotiating you always want to make sure that you're looking at the total price of the car first and negotiate that price down as low as you can not only will this give you the best out the door price but it's also going to give you lower payments for financing and leasing we can see here that the total price for this Corolla is twenty six thousand eight hundred and four dollars which results in a lease payment of 451 dollars per month over a 36 year term or three years at 5.99 interest I'm doing zero money down on this lease which is a good idea because remember this is not a car that you're going to own in the end so it doesn't make a lot of sense to put a lot of money down on a car like this I was however able to negotiate a better price by negotiating out some of the dealer fees which were one thousand two hundred and twenty one dollars and if we apply that as a discount to the price of the car we can see that it reduces the total price to twenty five thousand five hundred eighty three dollars which also reduces the lead these payments down to 414 dollars per month now when it comes to leasing in order to establish whether you're getting a good deal or Not A good rule of thumb is to follow the 1.5 percent rule which means that the monthly payment should not exceed 1.5 percent of the total price of the car in this example 1.5 percent of twenty five thousand five hundred eighty three dollars would be 383 dollars per month so because I am paying more than this this is still not exactly the best lease deal so in this case financing does make a bit more sense I'm going to finance the same pre-negotiated price over a 48 month term at 5.99 which is a reasonable interest rate in today's market I'm also going to go with a four-year term instead of a six or seven year term because it's always better to pay off a car as quickly as possible that way you minimize the amount of money that you spend in interest and you also reduce your risk of being in negative equity where the car is worth less than what you owe and this is going to result in a monthly payment of just over six hundred dollars which means that in four years I'll own the car and I'll have spent nearly twenty nine thousand dollars or roughly twenty five hundred dollars in interest now of course if you want to save yourself some money and interest you could make a large down payment which is always a great idea to do when financing say you make a down payment of ten thousand dollars which is way more than twenty percent an ideal amount that'll reduce your payments to around three hundred sixty five dollars per month which means that after four years you'll have spent around a thousand dollars in interest which is very reasonable of course if you want to avoid having any interest you're not really into investing or if you just don't want to have any debt you could just pay for the car in cash and avoid having payments altogether of course if this were a situation where the interest rate were a lot higher which is often the case in today's market where we often see interest rates anywhere from eight to ten percent or even higher it might make more sense just to buy the car in cash or just go with a shorter Term Loan and make an even larger down payment so there you have it I hope this information was helpful and also help you decide which of the three options makes the most sense for you so leave a comment below and if you enjoyed this video make sure to like And subscribe you can also take a look at my other car buying videos by clicking these links over here make sure to follow me on Tick Tock and Instagram and if you need any additional car buying advice recommendations or help with getting a great deal on your next new car purchase make sure to visit carhelpcana.com thanks so much for watching and see you next time

Channel: Car Help Corner

Views: 58,576

Keywords: leasing vs buying a car, lease vs finance car, leasing vs buying, leasing vs buying used car, leasing vs financing, leasing vs financing a car, financing a car, financing vs leasing a car, financing vs leasing, financing vs leasing a car pros and cons, buying a car vs leasing, buying a car vs leasing a car pros and cons, buying vs leasing, buying vs leasing a car, how to buy a car, buying a car vs financing, car buying 101, car leasing 101, car leasing explained

Id: y3E7VvbCr0o

Length: 11min 33sec (693 seconds)

Published: Wed May 10 2023