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BUSINESS Tuesday 31 december 2019
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Liz Weston: When leasing a car is the more frugal option

By LIZ WESTON 2 out of 5 adults don’t have — You’re affluent and want
Associated Press $400 to cover an emergen- a new car every few years.
If you need a car, the most cy expense, according to — Money is tight and you
frugal option is to buy one the Federal Reserve. Plus, if need the predictability of a
that’s 2 to 3 years old, pay you don’t have money for car that’s under warranty.
cash and drive it until the a down payment, it’s much — You’re acquiring a new
wheels fall off. easier to get a lease than a electric vehicle, since the
The least frugal option tra- loan, Montoya says. tax credits that encourage
ditionally has been leasing, Another issue is that new- people to buy these cars
where you make monthly car buyers often don’t new also contribute to fast-
payments to drive a car but hang onto their vehicles er-than-average deprecia-
don’t own it. You’re pay- long enough to get the tion. The most frugal way to
ing for the vehicle during most value from their pur- lease is to avoid the temp-
its most expensive period chase, Montoya says. Ide- tation to upgrade, since
— cars lose more than half ally, you would keep the the same payment already
their value on average in car for many payment-free gets you a more expen-
the first three years — and years. sive car. Instead, lease the
you have nothing to show What about buying used? same car you could afford
for your payments after the That’s still the most finan- to buy and save the differ-
lease ends. cially sound way to get into ence. You also can lease
Few people opt for the a vehicle since you’re let- used cars at some dealer-
frugal way, however, and ting the first owner take the ships or by using a lease-
car buying has changed depreciation hit. It’s less trading site.
enough that leasing may sound, though, when peo- One way to combine the
no longer be the costliest ple finance the car with a advantages of leasing and
option. In some situations, This undated file photo provided by NerdWallet shows Liz Weston, long loan, as many do. The buying used, Montoya says,
leasing could be the most a columnist for personal finance website NerdWallet.com average used-car loan is is to buy your car at the
Associated Press
sensible. 67.5 months, almost as long end of its lease. Ideally, you
COSTLIER CARS, LONGER parable figure from 2014, car with some equity at the as the 69.3-month average would do that with cash or
LOANS according to Edmunds. end of the loan. But such for new cars. a loan of three years or less.
To understand why, let’s Consumers stretch out their “apples to apples” com- “By the time you’re done “You’re the previous own-
survey the U.S. automotive loans to get lower monthly parisons of a six-year car with (the loan), it’s a 9-year- er so you know how well
landscape. Americans are: payments; most buyers loan versus two three-year old car,” Montoya says. it was taken care of, and
— Buying more expensive now opt for loans longer leases leave out a lot of im- WHEN LEASING IS BEST you have nice access to a
cars. than five years. Even so, the portant details, such as re- Leasing is usually better great used car,” Montoya
— Financing larger average monthly payment pair and maintenance bills. than buying when: says.q
amounts. is still a hefty $568, up from These costs tick up as a
— Taking out longer loans. $492 five years ago. Leas- car ages, and warranties
Americans increasingly opt ing a similarly priced car (which cover most repair
for SUVs and trucks over se- would cost significantly less and maintenance costs)
dans, then spring for higher each month. usually end at three years.
trim levels and more fea- “You could probably get The expense normally
tures than in the past, says something for about $400 a wouldn’t be enough to
Ronald Montoya, senior month leased, easy,” Mon- make leasing the cheaper
consumer advice editor toya says. option — unless people
for car comparison site Ed- LEASE VS. BUY CALCULA- don’t have savings and use
munds. The average pur- TION a credit card or a payday
chase price for a new car in On paper, buying still loan.
November was $37,981 — comes out ahead mostly That describes a whole lot
$4,699 more than the com- because you’ll own the of people in the U.S., where