Of all the 'investments' most
physicians make, your car is by far the worst. Though
strictly speaking it's no investment at all, it does eat
up an enormous amount of money every year that could more
sensibly be socked into reducing your mortgage, funding
your RRSP, investing in the stock market or even purchasing
a vacation home. So should you buy or lease?
MAKE
IT YOUR OWN
The buy decision is an easy one. If you plan to keep
your car more than four years or drive more than 24,000
km a year, you should buy. You can even go farther than
that. Since driving a new car isn't top priority, seriously
consider making your next vehicle one that's been previously
owned. That's right, buy a used car. Cars last a lot
longer than they once did — giant strides have
been made by the auto industry in two key areas: engines
run much longer before they begin to burn oil and bodies
no longer rust out as quickly as they once did.
Still, do some online research
before you buy. You're looking for a vehicle that retains
its value over time. These are generally the higher
priced imports — Lexus, Mercedes, BMW, Infiniti.
Check out www.lemonaidcars.com
and www.edmunds.com,
a US site, for the depreciation statistics. A two-year-old
Mercedes will cost you about half of what it did new.
Another tip: if you possibly can, pay cash. With a trade-in
it may be possible. If you need to borrow, go to your
bank and negotiate the best interest rate you can.
WHAT
ABOUT LEASING?
There is really only one good reason to lease. You just
have to drive a new car and enjoy trading in every two
or three years.
The cost of a car lease is based
on the anticipated depreciation. Your monthly payments
over the life of the lease are calculated to cover the
difference between what the car was worth when you drove
it off the lot and its value the day you turn it in
plus, of course, taxes and finance charges. Go online
to find out what the car you're interested in will likely
be worth when your lease expires.
What you want to do, then, is to
keep that difference as low as possible.
For that reason, you want to get
the best deal you can on the car. To do this, bargain
as though you intended to buy the vehicle. Only after
the price has been determined should you tell the salesperson
that you'd like to lease.
Other key points. Take a closed-end
lease, not an open-end one. With the latter you could
be on the hook for thousands of dollars if the market
value of the car drops dramatically over the life of
the lease. Also take 'gap-insurance' in case the car
is totalled or stolen and your insurance company won't
cover the full price. Pay attention too, to the numbers
of 'free' kilometres you're entitled to each year. Go
over and you'll find yourself paying anywhere from 10
to 15 cents a click.
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