To Buy Or Lease A Car?

Buying or leasing a car is never an easy decision to make. With so many options it's difficult to choose what's best for your lifestyle. On Wednesday, Early Show Financial Adviser Ray Martin guides you in the right direction.

Meet our couple:
Jeff and Marci Weingart have a situation brewing. Their newbie arrival this April means there will be two car seats to put in the back of Marci's Toyota Corolla or Jeff's Celica. They were single when they bought those cars. At the time they weren't thinking about their precious cargo and all the baby gear that's part of today's "have kid will travel" family life.

Now Marci and Jeff are prepared to let go of one of the sporty rides bought during their single days and replace it with a more practical -- and safe -- set of wheels.

The Weingarts prefer the Toyota brand and have decided on a minivan or a sports utility vehicle. They have decided to sell Jeff's 1993 Celica and use the proceeds toward the purchase. They've set a budget of $17,000 to $18,000 for total cost and are leaning towards a used or "pre-owned" minivan that has recently come of a lease.

Do your homework:

The first thing the Weingarts need to do is to assess the resources they have available for the purchase. Online resources can help Jeff get a sense of what he can get for his 1993 Celica with 95,000 miles.

Here are some sites:

Edmunds

Edmunds lets you print a window sticker for your car with the selling price, description, features, mileage, etc. That site indicates Jeff's Celica could fetch around $6,500 based on its current condition.

Jeff and Marci also have to get a handle on the current financial resources they have available for the purchase. Cash for a down payment, registration fees, and taxes must all be considered. The sites above can help with that too.

Shopping around these sites, it didn't take long to find out about Toyota's Sienna minivan as well as extensive price information on new and used models. Kelly Blue Book offered the dealer invoice
cost (the price the dealer pays the manufacturer for the car) and the suggested retail price (the price the ealer wants you to pay for the car).

When negotiating for a new car, start with the dealer invoice price and work up as little as possible. New models of the minivan the Weingarts are considering go for around $24,000; two years used with around 30,000 miles go for about $18,000, or $6,000 less. Given their budget and the quality of cars today, I'd say they are smart to consider used.

Think of it this way: It's new to yo!
Buying used -- or "pre-owned" in auto industry parlance -- is not a lay-up.

Be careful to avoid cars that appear wellcared for on the surface but have been abused. Remember when Hurricane Floyd caused extensive flooding in the Southeast last year? Many cars waterlogged during that storm are now coming off lease and are on the market.

Ask the seller to present a title history and complete maintenance
history. Some used car sites such as IMotors supply an extensive
record of this information for each car they sell.

Check out Intellichoice and Carfax for a damage history registered by the car's vehicle identification number (VIN). It's well worth the $100 or so to have an ASE-certified mechanic look over the car before you buy.

Financing basics:

The famous and wealthy J. Paul Getty proclaimed: "If it appreciates, buy it. If it depreciates, lease it." If only it were that simple.
Getting a loan and leasing a car are both forms of financing. Leasing will, in most cases, cost more in finance charges, but that's not the whole story.

When it comes to cars, the decision to buy or lease ultimately comes down to the preferences of the owner.
Buy the car outright or finance with a loan if:

You prefer ownership.
You will subject the vehicle to heavy wear and/or high mileage.
You want to modify or add custom accessories to the car.
You plan to keep the car for a long time.
You don't like debt and have no interest in investing.

Finance with a lease if:

You want a new car every few years and are willing to pay the additional cost for this.
You use the car for business and can deduct the lease payments.
You drive less than the average 15,000 miles per year.
You would rather invest cash that would otherwise be used towards the purchase.

To see what Weingarts final decision, a financial table for purchasing versus leasing and for leasing information for business owners check out CBS Marketwatch.

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