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The newsletter articles on this page provide valuable information on timely and interesting financial issues across a variety of subject areas, including retirement, investments, personal finance, annuities, insurance, taxes, college, and government benefits.


   
The Importance of Saving for Retirement at a Young Age
Five Things to Know About Inherited IRAs
What is an ABLE account?
Is an ABLE account subject to federal tax?
Cartoon: Money Monsters
Four Lessons Grandparents and Grandchildren Can Learn Together
Projecting a Happy Retirement
Should You Buy or Lease Your Next Vehicle?
Should I pay off my student loans early or contribute to my workplace 401(k)?
Common Questions About Student Loan Repayment


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Should You Buy or Lease Your Next Vehicle?

Buying considerations Leasing considerations
Ownership When the vehicle is paid for, it's yours. You can keep it as long as you want, and any retained value (equity) is yours to keep. You don't own the car--the leasing company does. You must return the vehicle at the end of the lease or choose to buy it at a predetermined residual value; you have no equity.
Monthly payments You will have a monthly payment if you finance it; the payment will vary based on the amount financed, the interest rate, and the loan term. When comparing similar vehicles with equal costs, the monthly payment for a lease is typically significantly lower than a loan payment. This may enable you to drive a more expensive vehicle.
Mileage Drive as many miles as you want; a vehicle with higher mileage, though, may be worth less when you trade in or sell your vehicle. Your lease will spell out how many miles you can drive before excess mileage charges apply (typical mileage limits range from 12,000 to 15,000).
Maintenance When you sell your vehicle, condition matters, so you may receive less if it hasn't been well maintained. As your vehicle ages, repair bills may be greater, something you generally won't encounter if you lease. You generally have to service the vehicle according to the manufacturer's recommendations. You'll also need to return your vehicle with normal wear and tear (according to the leasing company's definition), so you may be charged for dents and scratches that seem insignificant.
Up-front costs These may include the total negotiated cost of the vehicle (or a down payment on that cost), taxes, title, and insurance. Inception fees may include an acquisition fee, a capitalized cost reduction amount (down payment), security deposit, first month's payment, taxes, and title fees.
Value You'll need to consider resale value. All vehicles depreciate, but some depreciate faster than others. If you decide to trade in or sell the vehicle, any value left will be money in your pocket, so it may pay off to choose a vehicle that holds its value. A vehicle that holds its value is generally less expensive to lease because your payment is based on the predicted depreciation. And because you're returning it at the end of the lease, you don't need to worry about owning a depreciating asset.
Insurance If your vehicle is financed, the lien holder may require you to carry a certain amount of insurance; otherwise, the amount of insurance you'll need will depend on personal factors and state insurance requirements. You'll be required to carry a certain amount of insurance, sometimes more than if you bought the vehicle. Many leases require GAP insurance that covers the difference between an insurance payout and the vehicle's value if your vehicle is stolen or totaled. GAP insurance may be included in the lease.
The end of the road You may want to sell or trade in the vehicle, but the timing is up to you. If you want, you can keep the vehicle for many years, or sell it whenever you need the cash. At the end of the lease, you must return the vehicle or opt to buy it according to the lease terms. Returning the vehicle early may be an option, but it's likely you'll pay a hefty fee to do so. If you still need a vehicle, you'll need to start the leasing (or buying) process all over.

After declining dramatically a few years ago, auto sales are up, leasing offers are back, and incentives and deals abound. So if you're in the market for a new vehicle, should you buy it or lease it? To decide, you'll need to consider how each option fits into your lifestyle and your budget. This chart shows some points to compare.

Buying or leasing tips

  • Shop wisely. Advertised deals may be too good to be true once you read the fine print. To qualify for the deal, you may need to meet certain requirements, or pay more money up front.
  • To get the best deal, be prepared to negotiate the price of the vehicle and the terms of any loan or lease offer.
  • Read any contract you're asked to sign, and make sure you understand any terms or conditions.
  • Calculate both the short-term and long-term costs associated with each option.
 
©2017 Broadridge Investor Communication Solutions, Inc. All rights reserved.
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 *"Securities and Investment Advisory Services offered through KCD Financial, Inc., Member FINRA & SIPC. Securities are offered in Maryland, Virginia, Pennsylvania, New Jersey and North Carolina. For the residents of the other states, information provided here is for educational purpose only."

This communication is strictly intended for individuals residing in the state(s) of MD, NJ, NC, PA and VA. No offers may be made or accepted from any resident outside the specific states referenced.
 


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