Buying a car

Time for a new car? For most of us, buying a car is a big deal. It’s often the second largest purchase you make after your home. Like any major financial decision, you need to take your time and ignore the “buy now” messages that regularly flood the media.

So, first things first: figure out how much you can afford to spend. If you’d rather buy than lease, think about applying for a loan before you get to the car lot. That will help you set your price range.

Next, decide what kind of car best suits your needs. That’s needs, not wants. If you want the hottest set of wheels on the block, that’s okay. In the long run, though, you’ll be better off answering these questions before you decide:

• Are you single or a family of five?
• Will you use your car to commute daily or putt around on weekends?
• How much gas will it use?
• What sort of maintenance will it require?
• How much will your license and insurance cost?
• Does it qualify for a Clean Air Auto Loan?

New or used?

It may be that the only way to afford the car of your dreams is to buy used. There’s nothing wrong with that. But whether you buy from a dealer or an individual, be careful. Take your time and do your homework. There are many books and online resources that offer excellent advice. Most of us aren't mechanically inclined. So, once you've test-driven the vehicle take it to a licensed mechanic for a final inspection.

Financial Considerations

To lease or buy

A lease is like a long-term rental. You're paying to use a car. Your payments cover the cost of the vehicle's depreciation while you drive it, rather than its purchase price. If driving a new car is more important to you than owning one, then you might consider leasing. On the other hand, if you are a high-mileage driver, it may be smarter to buy. Consider your lifestyle and financial situation when reviewing the pros and cons of each.

Buying pros and cons

• you can trade in that old clunker
• you own the car and if you want to modify it you’re free to do so
• there are no penalties for extra depreciation or extra mileage, which are common in leases
• your payments are based on the value of the car, not its depreciation, which could mean higher monthly payments than with a lease.

Leasing pros and cons

• a way to acquire a new car you may not be able to afford to buy
• monthly lease payments are generally less than financing payments
• the lease agreement requires you to keep the car in good working order
• usually a full factory warranty for the entire term of the lease, so you can say goodbye to big repair bills
• annual mileage limits with penalties if you go over the limit
• leasing may have tax advantages, but you should consult your advisor for more information
• if you terminate the lease early, there may be penalties.

Whichever method you choose, think about all the costs involved in obtaining a new vehicle. Whether you lease or buy, you are still responsible for insurance, licenses, maintenance and repairs.

Going green

As enticing as buying a new vehicle may be, there are cheaper, more environmentally friendly choices. For instance, if you only need a vehicle now and then, think about sharing with friends, joining a vehicle co-op or getting a renter for a day or two. You’ll save money and help save the environment. Or, you could opt to buy a hybrid vehicle. If you need to borrow, we’ll help you cut CO₂ emissions, and your interest rate with a low rate for vehicles with low CO₂ emissions. The choice is yours. Just make sure you choose a transportation option that meets your needs and is affordable and enjoyable.