Disclaimer: I’m pretty fresh out of college, and have never bought or leased a car before.
I need a car for my new job starting this fall, but I’m planning on going to grad school in a city in fall 2014. It is likely that I wouldn’t need a car then, but even more likely that I will be unable to afford high payments. In my mind, there are two real options: buying a car that I can pay off before starting grad school (up to $5k seems doable), or potentially finding a 1-year lease. I don’t know much of anything about leasing, or even if a 1-year lease is possible, but I am a little concerned about going over the mileage limit because I’d be driving around 300 miles a week commuting. What is the smartest thing to do?
I’d buy a beater (cheap car that runs well) and sell it when you go back to school;. You won’t lose much reselling a $2000-$3000 car. Renting for a year is quite expensive.
look in to an assumable leasing arrangement. there are websites that are dedicated to this. make sure that you protect yourself against any negative situations and that the original leasing company allows the lease to be assumed. know all liabilities and requirements on your part. buying a car for several thousand dollars may require more maintenance and upkeep than you expect. would you have to inspect a used car in the state where you register it? chances are a hoopty is going to cost $$$ to meet state safety requirements. a new car lease for one year is financially an unsound move. most manufacturers will not offer such a short term arrangement. the best leases for new vehicles are usually 3-4 year terms. mileage is not really a factor. your monthly payment on a lease is based upon usage . the difference between a 12,000 mile per year lease and a 15000 mile per year lease may amount to as little a $1.00 per day. whatever you decide, get all the facts before making your decision. know that there is risk in selling a car privately as well. it sounds easy, but your safety is important. lot of scammers and untrustworthy souls out there . if you purchase a used car, remember that you still have a lien to satisfy when time to sell unless you paid fully for it at the outset. so remember to factor in the interest and negative equity that you may be facing. no negative equity ever occurs on a lease.
300/week is almost 16k miles a year. Leases only go up to 15k per year.
If your budget is 5k, spend about 4k on the car and budget the rest for unexpected problems with the car. Keep the car after you get to grad school, you may find you DO need a car afterall. And if you don’t, advertising the car at school should make for a quick sale
You can get leases for more miles, but a 1 year lease is probably THE most expensive way to own a car, short of going to Hertz. If you could afford those payments (and pass the credit check) you could afford the payments on a one year loan with a BIG down payment on a used car, hopefully a bit more than $5,000.
You’ll want to check out getting a loan (if needed) through a credit union. Do that first, before you go shopping, that way you’ll know what you can afford.
I think you’d come out money ahead by buying a 5-10 year old used car than leasing, but it would be more convenient to lease, I can see that, you wouln’t have the somewhat unpleasant job facing you to sell it later.
If you decide to buy a used car, choose a make/model/year that Consumer Reports recommends as a good used car value, then after that, verify it has been well maintained by asking an inde mechanic to inspect it for you. In my opinion the age of the car is more important than the mileage. Cars go to 200K miles routinely these days. I’d choose an 8 year old car w/140K miles over a 15 year old car with 100K miles. Older cars – those 15 years and older say --tend to fail not because of the miles, but because of the age of their gaskets, rubber parts, sitting around unused and getting water damage, etc.
A 12 month lease versus a longer one will be expensive. With limited funds, I think you are better off buying something even if you will need to sell it again in a year. Another unknown with a lease is the additional costs for wear and tear at turn in time. Windshied ding, upholstery stain or rip, uneven tire wear, and so on can all be considered above normal wear and tear and chargable to you. I went to court and lost on similar items once on ten cars that we leased and would never put myself in that position again.