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Choosing a Car: What To Consider

To buy new or used, it's a big question.

Whether you choose to go new or used, you’ve only just begun making decisions. Your biggest choice comes in deciding what kind of car to get. This is probably the biggest purchase you’ll make other than your home, so you’ll want to be confident in your decision. If you’re stuck, consider the following:

1. RESALE

How long do you plan to keep your car? Do you plan to drive it until the wheels fall off, or do you see yourself wanting to upgrade in a few years? If this is a car you plan to own for less than five years, you need to look at the potential resale value.

Cars from luxury brands, such as Lexus and Acura, tend to hold their value fairly well. Cars with a reputation for longevity and dependability, like Toyota and Subaru, also tend to depreciate slower than other brands. Also, look for relatively recent vehicle lines. These are car models that will likely still be in production several years from now, ensuring parts and service won’t be hard to come by.

2. DAY-TO-DAY

Many people start car shopping by making a list of things they occasionally do or want to do someday. They may want to own a boat, so they need a car that can tow. They go camping sometimes, so a car that can offroad is preferred. This is a good way to end up with more car than you need.

Instead, look at what you use your car for on a daily basis. For most people, this is a commute to work and back. For this, you need a comfortable car that gets good gas mileage and is easy to park. For special occasions, you can always rent a car or truck. How many times a year do you see yourself cking up furniture or hauling a trailer? If it’s less than five, remember that you can still rent a truck or van for such occasions.

3. BUYING OR LEASING?

You have options when it comes to how to purchase your car. You can buy it, which means you’ll take out a loan for the purchase price. When the loan is paid off, the car is yours, free and clear. You can also lease a car, which is essentially a long-term rental. At the end of the lease term, you may have the option to buy the car, depending on the terms of the lease. If you choose not to purchase it, you may be charged penalties for things like mileage or damage to the vehicle. If you wreck the car, the insurance company will make the deal whole before they concern themselves with your damages.

Generally speaking, leasing a car isn’t as good a deal as buying. If you absolutely must have a top-end luxury car, a lease is one way to make it affordable. The tradeoff, though, is that you are not building equity. You’ll never be able to get a trade-in, and you may have to make expensive penalty payments when getting your next car.