Buy or Lease a Car? (Car Shopping Basics 1/5)

Summary

Joan, a new college graduate, needs a car for her job at Corporate Co. in LA. She should research her needs on Kelley Blue Book, weigh options between leasing (with lower monthly payments but high fees and penalties) and buying (smarter financially but risky with new cars). Certified pre-owned cars offer a middle ground. Stay tuned for financing tips and more resources.

Takeaways

• 😀 Joan is a recent college graduate who needs to buy a car for her new job at Corporate Co. in LA.
• 🚗 Joan should start by understanding what kind of car she needs, using resources like Kelley Blue Book.
• 💰 After selecting a car, Joan needs to decide between leasing and buying.
• 📝 Leasing involves renting a new car for a short period, usually three years, with monthly payments covering the car's depreciation.
• 💡 Leased cars often have lower monthly payments than auto loans and are covered by the manufacturer's warranty.
• ⚠️ However, leasing has drawbacks: requires excellent credit, involves complex contracts with fees, difficult to exit without penalties, and is generally more expensive long-term.
• 🏠 Buying a car is usually the smarter financial move compared to leasing, even in the short term.
• 🚗 Joan should consider buying a used car, as new cars lose 45% of their value within the first three years.
• 🔧 Certified pre-owned cars are a good option, being cheaper than new cars and less risky than regular used cars.
• 📚 The video encourages watching the next installment for financing advice and visiting their website for more educational materials and recommendations.

Q & A

What is the main challenge Joan is facing in the script?

Joan's main challenge is that she needs to get a car for her job at Corporate Co.'s LA branch, but she has no idea where to start.

What is the first step Joan should take to understand what car she needs?

Joan's first step is to use the free research website Kelley Blue Book to understand what car she needs.

What are the two main options Joan has to consider for acquiring a car?

Joan has to decide between leasing or buying a car.

How does the leasing process work in terms of financials?

Leasing involves signing a lease contract that covers the difference between the new car's price and its estimated value at the end of the lease period, with monthly payments and interest.

What are the advantages of leasing a car?

Leasing offers smaller monthly payments than auto loans and includes coverage under the manufacturer's warranty from beginning to end.

What are the four serious drawbacks of leasing a car as mentioned in the script?

The drawbacks are: 1) requiring excellent credit, 2) being complicated with hefty fees for damages or exceeding mileage limits, 3) difficulty in getting out without major fees and penalties, and 4) being inherently more expensive than buying a car.

Why is buying a car generally a smarter financial move than leasing?

Buying a car is smarter because leasing multiple cars over a 10-year period is more expensive than buying one car and using it for many years.

What is the average depreciation rate of a new car in the first three years of ownership?

On average, a new car loses 45% of its value within the first three years of ownership.

What are the issues with used cars that Joan should consider?

Used cars can have serious problems, especially concerning maintenance and repair.

What is a certified pre-owned car and why is it a good alternative to new or used cars?

A certified pre-owned car is less than 5 years old, has less than 80,000 miles, and has undergone an extensive exam to ensure operational quality. It is cheaper than a new car and less risky than used cars.

What additional resources are available for Joan in the next video and on the website?

In the next video, Joan will learn about financing a car, and the website offers more educational materials, free auto loan, and car-buying recommendations.