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VEHICLE PURCHASE: CASH, LEASE OR FINANCE?

Nothing gives you the freedom to go wherever you want, whenever you want, like a vehicle of your own, whether for work, play, or a combination of the two. Even more fortunate are those few among us, who can plop down cash for the vehicle and drive out without having to worry about financing the purchase.Louis_Rumao

When you walk into a car dealership, and the salesperson finds out that you are ready to buy TODAY, there is joy all around. However, when the salesperson finds out that the purchase will be a cash transaction, his joy is reduced significantly! Granted, no dealer will turn away a cash-paying customer, but they prefer customers who lease a vehicle or finance it through the dealership, because the dealer has more opportunities to make money on the car deal. That ranges from the cut they get by arranging a lease or a loan, to adding options like extended warranties or antirust coating that buyers are more likely to choose as they can fold it into the amount they borrow. In some cases, those extras account for up to 75 per cent of the profit made on the sale of a vehicle.

Cash vs. Financing

According to one marketing research, about 70 per cent of people finance their cars; about 18 per cent lease the vehicles and around 12 per cent pay up-front with cash.

The advantage to financing is that you’ll usually end up with a better car than you can if you’re paying with cash. If you have good credit, and if a low-interest rate loan is available, you would be better off keeping the cash to invest or to earn interest on it. The only drawback of financing is that you’ll need to make monthly payments in order to pay off the loan.

By Louis Rumao

(Full text in PTA Feb/March issue)

 

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