In This Issue

To buy or to lease?

July 18, 2012

To buy or to leaseFor motorists in the market for a new set of wheels, that is the question. Here are things to consider before going either route.

By: Jennifer Kubiak

Deciding to invest in a new set of wheels is just the beginning of a long string of choices. Should you lease or buy? If buy, new or used?  What about the interior: fabric or leather?

While we can’t speak to your upholstery preferences, we can offer tips that will save you time, money and stress. (We also have a few helpful ideas about car insurance, too!)

Lease or buy?

Although the decision to buy or lease comes down to money for most people, Ron Montoya, consumer advice editor at edmunds.com, advises auto owners to look beyond the dollar amount. “It depends on your lifestyle, how you treat your car and how long you plan to keep it,” he says.

Buying may be the perennially popular choice, but leasing continues to gain traction. (Right now, a quarter of all drivers are going this route.)

Typically, leasing is a good option if you:

Also consider these pros and cons:

Leasing

Pros

Cons

  • Less or even no money down and lower monthly payments.
  • A new car every few years.
  • Low to no maintenance costs.
  • Resale value doesn’t matter.
  • A tax deduction for small businesses.

 

  • May require a higher credit score.
  • May contain hidden monthly costs like taxes or fees when you turn the car in.
  • Mileage cap (and penalties if you’re over the limit).
  • If you decide to buy the car, it’s more expensive at the end of the lease than if you bought it outright.

 

If leasing seems like the choice for you, also keep in mind the following:

If buying is more your style, you’re in good company. “Ownership is in our nature,” says Dave Freeman, vice president of personal lines underwriting at ERIE. “Americans want to be able to say ‘I own it’ rather than ‘I’m borrowing it.’”

Buying is typically a good idea if you:

Also consider these pros and cons:

Buying

Pros

Cons

  • It’s all yours.
  • The payments stop once the
    car is paid off.
  • You’ll avoid the extra
    charges that can come
    with leasing.

 

  • More money due at signing
    and higher monthly costs.
  • Repair and maintenance expenses.
  • Depreciation incurred if you
    plan to resell the car when it’s
    paid off.

If you’re still on board to buy, keep this information in mind:

New or used?

According to cars.com, drivers will buy about 14 million new cars in 2012. If you think you might be among those shopping for a brand-new vehicle, consider a few things first.

New Car

Pros

Cons

  • Newer safety features.
  • Customizable.
  • Better warranty.
  • Typically has better fuel
    efficiency and lower emissions.

 

  • More expensive to insure.
  • Maintenance costs required
    to maintain warranty.
  • No record of reliability.
  • Higher taxes.

Also know that a new car isn’t out of the question if you’re shopping largely on price. “Most people think used cars are less expensive, but that’s not always the case,” says Montoya. “Many used vehicles are priced high because of shortages due to people keeping cars longer in tough times. This makes their prices comparable to new cars.”

Before you go through with a new car sale, keep these things in mind:

If new is not your thing, consider used—after all, nearly 37 million previously owned vehicles changed hands in 2011.

Used

Pros

Cons

  • Less expensive to insure.
  • More car for your money.
  • CarFax® vehicle history
    report provides detailed
    history of the car.
  • Older safety features.
  • More frequent  repairs.
  • Not customizable.

 

Remember to also:

Whether buying or leasing, be sure you’re prepared to pay taxes and registration fees, which can amount to thousands of dollars depending on the cost of your vehicle. And always get the facts. “Resources like edmunds.com and the Kelley Blue Book are very helpful in assessing the value of a vehicle,” Freeman says. “And don’t overlook the help your ERIE Agent can give you about the final price of a vehicle, how to properly insure it and what the difference in insurance will be if you’re deciding among several vehicles.”

Car insurance you can count on

We all know new cars depreciate fast (by most estimates, about 15 to 20 percent every year).i If that’s not bad enough, consider the fact that the compensation a standard auto insurance policy provides may only be enough to purchase a used car as a replacement—or that you could be liable for lease payments on a car that’s completely totaled.

ERIE gives you peace of mind to weather both situations with the New Auto Security Coverage Endorsementii. It includes features such as:

  • Lease/loan security: Covers the difference if you owe more on your vehicle than its current value and it’s a total loss. Coverage also applies to vehicles on lease or auto loan for up to seven years.
  • Replacement cost: Pays to replace your car if it is two years old or less and is a total loss. You’ll receive a new car of the same make and model—and if the model is no longer available, you’ll get a similar vehicle.iii
  • Repair coverage: ERIE will pay to repair your vehicle without a deduction for depreciation if it’s two years old or less and not a total loss.
Learn more about ERIE auto policies and this endorsement by contacting your ERIE Agent.

Jennifer Kubiak is a financial reporting assistant at Erie Insurance.

ihttp://www.bankrate.com/brm/news/auto/20011226a.asp
iiThis endorsement must be added to a new vehicle within 60 days of the lease/purchase of the vehicle and the Policyholder must have purchased comprehensive and collision insurance coverage. This endorsement is not available in New York or North Carolina.
iiiNot available on leased vehicles.

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