Financing to get the new car smell

There is nothing quite like the new car smell. So whether your current car is ready for the junk heap or you just want a new car there are a few considerations other than make, model and colour you need to think about. Getting a great deal means doing your homework before you get to the dealership, remember information is power.

0% – is it as sweet as it sounds?
Borrowing money for your car and not having to pay interest sounds like a fabulous idea and on the face of it, it is. While the 0% is not quite a bait and switch – it is advertised to get you into the showroom. So before you look at financing options make sure you have negotiated the purchase price and trade-in value. Negotiating the price, trade-in and loan term in one deal could lose you money. Suddenly the purchase price, dealer rebates or the car you wanted are no longer offered. Also, the 0% financing has many drawbacks. The 0% offer is only given to buyers with spotless credit, so before you bank on it you could be paying a higher rate of interest. The 0% is often limited to specific models and many 0% offers come with a short payback term, which can mean higher monthly payments. Make sure you understand what your budget is before you get too far along. If they have a cash back offer, but will not let you combine it with 0% financing, calculate the final amount you will be paying (including interest) to see which deal is better for you financially. As your financial advocate we are here to help you figure out the comparison and the calculations so you pay as little as possible for your new car.

Buying versus leasing – show me the money?
When is comes right down to it the real difference between buying and leasing is not about finances but about lifestyle and preferences. Certainly there can be financial advantages to both but the biggest question is whether or not you want to drive a new car every few years or not.

Leasing a car usually means lower individual payments which can translate into either saving money or driving a car you could not necessarily afford. Up-front costs are usually less as there are limited down payment requirements. Depending on the length of the lease, you will have few maintenance expenses as the warranties cover the entire term of the lease, especially if your term is 3 years. On the negative side insurance rates are typically higher for a leased vehicle and if you are trading in every few years you continue to pay a down payment each time. Many people will tell you that you are not paying for depreciation, but you are – it is factored into the monthly lease payments. You also need to be wary of charges and penalties for more than normal wear or extra mileage at the end of the lease.

On the other hand if you are buying your car you will likely have a lower insurance premium and will finish paying for your car before you stop driving it. On the negative side, since you will be keeping your car past its manufacturer’s warranty period you will have increased maintenance costs over the long term.

What it comes down to is this, if you want to change cars every few years leasing can be the way to go, if you are able to avoid the extra fees and penalties. If however, you are able to drive the car you purchased for a longer time period the financial advantage is yours. The lower the interest rate on your car loan the bigger the advantage over leasing.

Not sure about how to compare the cost between leasing and buying a car? Click here to go to the Lease or Buy Calculator provided by Industry Canada. Or come in. We can help you figure out the best alternative for you.