For the past four years, David and Brad have been comparing notes about their vehicles. David was paying $300 less per month than Brad, even though both vehicles had roughly the same sticker price. Brad can now keep his car and live payment-free; sell it and use the money toward a buying new model; or try leasing a new model like David.
If he keeps the coupe, his ownership costs obviously will be far lower than those of a new car because he would own the old car outright. Plus, as a vehicle grows older, the cost of insurance and annual license fees decrease, saving him even more.
Lease Tip
If you're keen on getting the best return on your hard-earned cash, you'll need to enter into a lease agreement fully aware of all the variables and terminology, as it is all too easy to lose the true cost of a vehicle in the fine print. |
If he sells the car, he'll have a nice down payment to put toward buying a new vehicle. And his monthly payment toward the purchase of the new vehicle may not be much different than that of David's second lease, as he will have substantially lowered the amount that needs to be financed. What's more, he will have decent equity in the vehicle, and it will be his to own and do what he wants with it.
If Brad sells the vehicle and leases a new one, he'll have more cash in his pocket than if he were to buy, due to the lower down payment, but he'll have to worry about annual mileage and the condition of the vehicle. He will also have no equity in the vehicle, and if he were to break the lease, he'd be liable for all the remaining payments. Plus, unlike David, Brad can't take any tax deductions for his lease payments. Considering all of the above, Brad would be better off making a traditional purchase rather than leasing, saving money over the long run.
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