If you are buying a car, there are several things to consider -- from knowing what you’re paying for to deciding if you should lease or buy. We turned to the experts at Consumer Reports to help you make the right choice for you and your family.
Leasing vs. buying
When it’s time for a new car, the choice between buying or leasing can be a tough call, especially with persistent supply chain issues and rising interest rates. So how do you know if leasing or buying makes the most sense?
With today’s car prices -- the average price paid for a new car is nearly $50,000 -- and with higher interest rates -- above 6 percent -- you’re looking at bigger monthly payments whether you buy or lease.
Consumer Reports says that on the surface, leasing can be more appealing than buying.
“First, the vehicle is always under warranty. Second, you’re always driving a car with the latest safety features. And third, if you’re working part time in the office and part time at home, you’re not driving as much, so that means you probably won’t exceed the lease’s limits on how many miles you can drive,” explained Jon Linkov, Consumer Reports’ Deputy Auto Editor.
Monthly payments are usually lower with a lease because you’re not paying for the full value of the car. That means you may be able to drive a more expensive vehicle than you’d normally be able to afford. While all of that might sound appealing, there’s one hard fact about leasing: At the end of the term, you’ll have to return the car because you don’t own it.
“A major downside of leasing is that you’ll have an endless cycle of paying for a car. You’ll never be without a car payment because as soon as your lease is up, you’ll have to either buy a car or get into another lease,” Linkov said.
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It’s difficult to make a fair, head-to-head comparison, but in general, two back-to-back three-year leases will always cost more compared with buying and owning a car over that same period. That’s because you’ll own an asset—the vehicle—after that period.
If you do choose to buy your next car, Consumer Reports says there are some easy ways to save.
- Don’t rely on a dealer for the best loan rate. Instead, check to see if your bank or local credit unions offer lower rates.
- If your heart isn’t set on a specific make and model, shop around for financing incentives that might be offered by manufacturers.
- And don’t forget: Even if you choose to lease, you should still negotiate the price of the car and the terms of the deal.
Are you footing the bill for a greener and safer ride?
As cars have become more complex, with regulations demanding better fuel efficiency and safety, it’s easy to assume that the price of a new car -- which can feel sky-high -- must be higher, too. So, Consumer Reports dug into the data, looking at the prices of hundreds of cars it bought over nearly 20 years.
“Our analysis found that from 2003 through 2021 that the price of new vehicles did not increase once we adjusted for inflation,” explained Chris Harto, Consumer Reports Sr. Policy Analyst for Transportation and Energy.
That’s despite some big improvements: Average fuel economy improved 30%, saving consumers an average of $7,000 in lifetime gas costs per car.
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And significant gains were also made in safety, with improved crash protection and technology to help avoid a collision. Electronic stability control and backup cameras are now standard on new vehicles. And many manufacturers are now including automatic emergency braking and blind spot warning.
But even if the prices of individual vehicles are staying the same, data show people are paying more for new cars. Why?
“Consumers are buying more expensive vehicles,” answered Harto.
Sales of SUVs have doubled, while sales of less expensive sedans and wagons have fallen. Harto says you’ll get more bang for your buck by buying a car vs. an SUV.
No matter what you choose to buy, Consumer Reports’ number one piece of advice: Don’t buy “more vehicle” than you need. It can cost you in financing, insurance, fuel economy, maintenance, and depreciation over time.