The usual questions regarding automobile ownership
revolve around whether to lease or purchase the vehicle and whether the
vehicle should be new or used.
Issues
Mileage: Most auto leases have a mileage
assumption of 12,000 or 15,000 miles per year. If you drive over that
amount, you will be required to pay a surcharge of 25 to 35 cents per mile
when you turn in the car. That can add up to large dollars quickly! If you
drive significantly less than the mileage assumption, you will be paying
for miles that you will never use.
Preference: Some people prefer to keep a
car for many years while others enjoy changing cars every few years. Both
are correct. The issue is what do you like to do.
Depreciation: What depreciates your
vehicle? Is it the passage of time or mileage?
Analysis
Mileage: Calculate your annual mileage.
Divide the number of miles on your current vehicle by the months that you
have had the vehicle. Then multiply this value by 12. This is your average
annual mileage.
Now think back over the time that you have owned
your current vehicle. Have you had any lifestyle changes that have
significantly changed your driving habits such as; changing jobs from one
requiring a 5-mile daily commute to one requiring a 50-mile daily commute?
Make adjustments to your average annual mileage for these changes as best
you can.
Preference: How long have you owned your
current car? If 30 months or less, you probably are one that enjoys
changing cars on a more frequent basis.
Strategies
Now you have all of the information you need to
determine how you should handle your next auto acquisition. Select the
situation that fits you:
Mileage within ±15% of annual lease allotment:
You drive what is considered average mileage. Leasing is a viable
option for you. Lease if you tend to keep a car less than 30 months, buy
if you tend to keep a car more than 30 months.
Mileage greater than 115% of annual lease
allotment: You drive what is considered high mileage. You will be
required to pay extra mileage charges if you lease your car making it very
expensive. You should buy a used car. What depreciates your car is
mileage, not time, so you should buy a low-mileage used car, possibly 2 or
3 years old. You will wear it out before is has time to get old.
Mileage less than 85% of annual lease
allotment: You drive what is considered low mileage. If you lease, you
will be paying to drive miles that you won't be using making it expensive
to lease. You should buy a new car. What depreciates your car is
time, not mileage. You will recapture some of the money you originally pay
when you finally do sell your low-mileage used car.
*****
This Web site is not intended for distribution to, or use by, any person
or entity in any country or jurisdiction where such distribution or use
would be contrary to local law or regulation.