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Choosing which new car to buy is one of the hardest decisions to make when it comes to getting a new ride, but so is how you’re going to pay for it.

Will you pay in cash, lease the car for a few years, or get a car loan and pay it back over a period of time? If you’re still unsure about what path to take, then take a look below and learn all about your options.

CASH
Paying for your car in cash has the most clear-cut advantages and disadvantages. For starters, when you buy a car in cash, it immediately goes under your name, and not under the bank’s, meaning it will be less of a hassle to sell the car.

Additionally, paying for the car outright liberates you from the worry of having to pay for it over an extended period of time. There are already plenty of monthly costs associated with car ownership, like insurance, gas and maintenance. Adding car or loan payments may cause a budget nightmare.

Furthermore, if you’re into personalizing or modifying your car, buying the car outright puts no restrictions on what you can or can’t do to the vehicle, which is something that can’t be said if you opt to lease.

Still, paying upfront for a car takes a huge chunk out of your bank account, and may leave you with limited funds for a rainy day, repairs or other financial situations that may arise. Additionally, since cars aren’t considered appreciable assets, paying for one in cash isn’t considered to be smart investing.
Read more about if you should buy or lease a car at AutoGuide.com
 

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I'm sorry, but this is absolutely a horrible article.
1. it mixes situations and confuses the reader from being able to compare each situation separately
2. it does not actually provide any guidance on which method is best at all and
3. it assumes the reader knows nothing about how cashflow or finances work but assumes the reader knows about tax planning and business deductions.

It really needs to have a second page with some relevant examples and a little more depth so the reader can understand what is going on.

The intro and the verdict should get to the point quickly and point out that this is all about cashflow. Then define what cashflow is and why it's important for everyone to consider their own budget and financial situation.

Cash: yes, easy, don't have to worry about those monthly payments. But it's a huge hit to your cash reserves, if you've been saving to pay for the car using that cash then it's probably not so bad as long as you've been separately saving up for your emergency fund. If you are using this for a business, is this a depreciable asset which could reduce your taxes each year?

Lease: you don't get to own the car, you're just renting it to a certain value that's determined by a bank. You're paying 2 years for 50% and that is a lower payment than financing 100% of the car and paying it off in 3 to 5 years. You're paying less taxes on the car while leasing but if you buy it out after the lease, you'll have to pay taxes on the residual value. If you finance the car at that time, the total interest for the entire car maybe greater than if you had financed it from the beginning assuming the same interest rates. 2 yr lease + 5 year finance = 7 years before total ownership. If you don't want to buy it out afterwards, you essentially pay the finance charges like an option to walk away assuming the residual value is the same as predicted. You can walk away from the car hassle free(mileage and condition aside), no need to take it to another dealership, carmax or craigslist. That time has some value to you. If you leased the car for business, then part of that lease is deductible and so forth.

Finance: You're financing 100% of the car depending on the down payment. If you have none, you'll need GAP insurance, extra monthly cost in case you get into a wreck and the value of the car is less than the principle on the finance, like an upside down home mortgage. If the rate is 0%, then it's like a cash payment split into monthly payment. So if the bank can give you 1% interest on your savings, then you actually make out by not using one time cash option first talked about. You get into minor tax issues on April 15th each year, but that's negligible and having that money in the account actually provides other security in case of emergency. After that 4 or 5 year period, you do own the car, an asset that's not worth what you paid for from the start, but still worth something. You just paid it off quicker than leasing and financing since you could afford the monthly payment in a straight finance deal. If you run a business and you use a line of credit to purchase the car, then this also acts like financing the car. Those costs could be deducted from the business as well as the depreciation on the car.

The time aspect: no one can predict your future, not even you. If your budget and cash flow look stable for the next 5 years and you can afford the financing especially with a 0% rate, the time value of money tells you to finance it at 0%. Having good credit affects both leasing and financing equally. If you like having options after a few years of ownership, leasing is probably better for you if you don't want the hassle. If you don't mind it, you should do either of the other two as long as you continue to have positive cashflow. Even during a lease negotiation, everything is negotiable. Don't look at the monthly payments, look at the total cost of the car then negotiate from there.

I wish you had written something like that.
 

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Hi Thorin,
I am agree with you but we can't hide the the disadvantages of leasing a car. Leasing a car has some pros and cons, leasing any vehicle gives you some benefits like no tax payments, less expenses on the car when it in warranty period, you have more options for buying any other vehicle because they are available in less price than the actual price of the vehicle.
Disadvantages are also there like at the end of the lease if you harm the vehicle, owner will cost you high. As of now I would say buying car without leasing is a better option for the those who can live with the same car till decades. People who wants to buy different cars when they get bore with their last one than leasing it is a better option for them.
 

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When leasing a vehicle, you're paying for the depreciation plus a little interest over the life of the lease. The problem with this is, cars depreciate 50% of their value in 3 years so you're always paying this higest rate of depreciation during a vehicles life. It's always best to buy a 3-year old vehicle, if you can't do that (like me), then hold onto the vehicle for 6 to 10 years. If you can't hold onto a car for that long and you need the newest, then lease.
 

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Thanks. My main point was that the article is very confusing.

I'm not saying leasing is the first option for everyone or anyone. I think the argument that if you want the newest car every 2 years you should lease does not really hold well. You can have the newest car every 2 years by using the other two options. There's more hassle at the end of the other two options because you have to find a buyer, negotiate the price and so on. There is a cost to doing that. You probably come out better because you can negotiate a better price rather than the depreciated value negotiated up front. Of course this means that you could have afforded the Cash or financing payments in the first place. So assuming you sell the car at the end of 2 years, no matter how you get there, for a lease, you can walk away. For the other two, you can go to carmax, craigslist, ebay or another dealer and you may come out $1000 more than that residual value on the lease. Maybe you are at $0 more. That's the risk you took when you signed on for having $100 or $200 less monthly payments for the lease. There's time value of the money you saved assuming you could actually save anything.

You can still own the car through a lease, 2 or 3 year lease at low rates and then it's a balloon payment at the end. How you get the balloon payment is another story. You can finance it by taking out a 3 year loan or 5 year loan. But that loan is on a smaller principle that's 50% or 40% of the original value of the car. So those monthly payments may be a little higher than the lease payment but it certainly should be much lower than if you were to finance the car's original value and pay it off in 5 years.

Again, it's all about cashflow, what you can afford.
 
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