Morning Mix


Should you buy or lease your next car? Helpful tips from MSU Federal Credit Union

Posted at 11:58 AM, May 31, 2019

It's a decision that eventually comes up in a household, should you buy or lease that next car?

Deidre Davis with MSU Federal Credit Union stopped by the studio to help families answer one of life's most common financial questions.

First, determine how much to spend on a car.

    • A good rule of thumb: spend no more than 25% of your monthly take-home household income.
    • This should include all costs: monthly car loan payments, fuel, insurance, and maintenance.

Should you purchase a new or used car versus leasing a new car? The choice is complex and depends on each individual’s financial situation and what he or she is wanting out of a car.

  • Buying a new car: you would have a full warranty and own it after you pay it off. A new car loses value as soon as it is driven off the dealership lot. You may also receive free maintenance and roadside assistance.
  • Buying a used car: you may be able to get the most car for your money if you buy used because it is already depreciated. Will have a shorter warranty period, if one still exists, and a car loan.
  • Leasing a car: you may qualify for a newer car for your money, but you won’t own the car outright and need to be careful about the lease terms to avoid hefty penalties. It is good advice to keep the value of the car to less than half of your annual salary.

As far as financing a car loan or lease, consider these points:

  • Obtain pre-approval for an auto loan through financial institution: can save you money over dealership financing and helps you determine what you can afford.
  • Compare auto loan rates: when looking at banks vs credit unions, often credit unions are nearly two percentage points lower than bank rates.

MSUFCU offer auto loans with $100 cash back with rates as low as 3.25% through June 30. They also offer applies to auto loans of $20,000 or more open during the promotional period.

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