When you are in the market for a new car there are many options to consider. Size, make, gas mileage, number of cup holders: the list goes on and on. One of the most important decisions you make is how you will finance your vehicle. Generally, there are only a few options available, but it is worth the time to go over those options so you can be sure you are getting the best deal.

Buying A Car

Buying a car is exactly that; you are purchasing a vehicle outright. How you might do so varies from case to case. For example, if you have enough money, you can buy a car for whatever the price is in one lump sum. The convenience of this is that you don’t have to deal with any financing and you can walk out of the dealership with a fully paid for new car.

For most people however, buying a car isn’t that easy. Most people choose to go with a financing option since most new cars cost upwards of 15k. Generally, the financing comes in the form of a car loan which you can apply for through many banks and lending services. Some dealerships even offer their own forms of car loans, streamlining the service. Once you have decided on a car, you want to also decide how much of a down payment you are going to put on it. The down payment is simply the money you pay upfront at the moment of purchase. A larger down payment will result in lower monthly payments, and vice versa. The other big factor to consider is the APR. The APR, or annual percentage rate, is basically an interest rate you pay while paying off your loan. In general, you want to put down as much money as you can afford in your down payment, that way you have smaller monthly payments (with less total APR).

Leasing A Car

Leasing a car is similar to financing a car, but instead of financing to pay for the entire value of the car, in a lease, you finance the cost of depreciation on the car. Let’s break that down. Say you want to buy a brand new car for $20,000. You have $2000 to put down, so your left with a total of $18,000 remaining. If you were to decide to lease, instead of financing to pay off the remaining $18,000, you would only finance to pay off the amount the car decreases in value. So say in 3 years, the car is only going to be worth $10,000. Well then you would finance your lease to pay for that difference, which is $8,000. Leases usually run for 3 to 4 years and also contain mileage limits (as more miles depreciates the value of a car). Once the lease has ended, you must return the car to the dealership, where you can then choose to buy the car if you want,

or lease another.

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