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Getting Your First Car – Should You Lease or Buy?

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Getting your first car can seem like one of the more confusing or stressful parts of ‘adulting.’ But don’t worry, this article will break down everything you need to know. Keep reading below to find out about the pros and cons (of buying vs. leasing), the top 5 cars for millennials, and what that intense phrase “taxes, titles, and fees” means.

Car - lease or buy?

LEASING VS. BUYING: THE PROS & CONS 

The pros of leasing: 
  • Leasing almost always gets you a lower monthly payment than you would have if you purchased that same car.
  • Car remains covered under warranty. And since most lease terms (usually 3 years) are the same as a regular warranty on a car, you’ll have an ownership cost that is predictable.
  • Some leases don’t have anything due at signing (aka: you don’t have to pay any money down).
  • You could potentially save a lot of money in sales tax (although be sure to check into this, because it varies state-by-state).

The cons of leasing: 

  • Almost every lease has a mileage restriction (generally 9-15,000 miles), so if you went over that, it would cost you.
  • You don’t own the car (so you have no equity) aka: any money that has gone to it; you don’t get back at all.
  • You would need to have excellent credit, so if you have bad credit or you can’t get a loan, then leasing isn’t the best choice for you.

The pros of buying: 

  • If you’re the type of person that wants to essentially have their car forever, then once you pay off the loan there’s no monthly payments to make.
  • No mileage restrictions!
  • You can customize it (you know, add extra features and such) as much as you want.

The cons of buying: 

  • It will be more expensive (in the short run, that is) than leasing a car would be.
  • You will be paying more upfront (down payment due at signing) than you would with a lease (since those can be zero-down).
  • Sometimes dealers can try to get you into the long-term loan realm, which can carry more issues (i.e: higher interest rates) than benefits for some people.

Millennial Car Buying Guide

THE TOP 5 CARS FOR MILLENNIALS TODAY 

  1. Honda Accord: 4% of millennials drive this car, making it the most popular model currently. It won Top Safety Pick for IIHS and has excellent MPG (30 MPG for city and 38 for highway).
  2. Honda Civic: Millennials prefer the compactness of this model. It also has a five star rating and is favored amongst critics.
  3. Nissan Altima: It gets 27 city MPG and 38 on the highway, making it a practical option in sedans for millennials.
  4. Toyota Camry: It’s the #1 midsize car and has excellent mileage (29 in the city and a whopping 41 on the highway).
  5. Toyota Corolla: Car & Driver lists it in its top 10 bestselling cars ever and it’s super-close in mileage to the Camry (29/36).

 

TAXES, TITLES, AND FEES – WHAT DOES IT ALL MEAN? 

All of these costs are additional to what you would pay for your car. Taxes mean sales tax – sometimes also called the state tax. This will usually be calculated by the salesperson and is based upon: the total purchase price, purchase price after trade-in is deducted, and purchase price after cash incentive is deducted. For example, if the car you’re buying is 20,000 and there’s an 8% sales tax, that would come out to 1,600. Keep in mind that cities can also add tax on top of this, and that vehicle sales tax can be different than the state’s normal sales tax.

Titles can vary state by state, but these apply to used cars. It applies to sale, gift, or paying off car loans. In most cases, you pay it before you register the car. Fees are normally included in the contract of your car, and if you’re buying your car from a dealership, they’ll usually pay the fees and taxes for you.

You have to choose the option that is best for you so can get the car you want. So, hopefully these tips can help you in the car buying (or leasing!) process.