There are three ways to acquire vehicles for your personal
use:
Pay cash. This choice makes the most sense if you want a
car you’ll hold for many years. If you buy a car that has
a history of holding its re-sale value, you’ll get a good
bit of your money back when you eventually sell. The
catch, though, is coming up with the money upfront so
this may be a practical move if you have a valuable
trade-in.
Use a car loan. This method makes sense if you want to own a
car for at least five years. Once you pay off your auto loan,
you’ll have the car and you’re through writing checks each
month. You’ll own the vehicle so you’ll get something when
you sell.
On the downside, you’ll pay interest on the car loan and
that interest is not tax-deductible. If you decide to hold
a car for more than five years, your maintenance costs
probably will increase.
Lease your cars. When you lease, you’ll be able to choose
a new vehicle every two or three years. When the car goes
off-warranty and high maintenance bills are imminent, you
can lease a new one.
With leasing, your monthly payments tend to be lower than
they are with vehicles purchased over time. However, you
never build any equity in leased cars so you wind up paying
fees every month, indefinitely.
Generally, the longer you plan to hold onto a vehicle, the
more it makes sense to buy rather than lease.
