Kiplinger Personal Finance: The Key Decision For Car Buyers Is How To Get Financing | Economic news


With a lease, you mainly pay the depreciation of the car over the term of the lease (usually three years). Monthly payments are usually lower than on a car loan, and repairs (but not maintenance) are covered for as long as the warranty lasts. Make sure you negotiate as hard for the price of a rental car as you do for a purchase.

Even if the loan or lease payments are within your budget, make sure you understand the amount of interest you are paying. The dealer’s finance and insurance office may extend a loan or manipulate a lease to lower your monthly payments, but it may not be the best for your overall financial outlook.

Plan for costs beyond monthly payments, such as repairs, maintenance, fuel, and insurance. You can find a 5 year cost of ownership tool at which estimates these costs, depreciation and more.

One of the main decisions car buyers make is obtaining financing from the dealership or from a bank or credit union.

Borrowing through the dealer allows you to take advantage of all of the manufacturer’s incentives, such as low or no interest financing or cash back offers.

Major used car dealers, such as CarMax and Carvana, also offer loans. CarMax, for example, aggregates several sources of funding on its website so that buyers can compare offers. Carvana includes a tool on its website that allows you to pre-qualify for a loan so that you can explore various vehicle financing options.


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