February 14, 2018

WTOP Interview: How To Talk To Your Mate About Retirement

LISTEN NOW! Learn how to get your retirement conversations off on the right track and focused on what's important
Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Interview Transcript:

Shawn Anderson: Okay, Thanksgiving is tomorrow, then it's Black Friday and maybe you've been hearing this on the radio a little bit. We've got deals on just about everything including cars in our commercials. Well, if a new car is on your holiday list, you may be wondering whether you should lease or buy.

And joining us live now in studio is Nina Mitchell co-founder of Her Wealth and Partner at The Colony Group. Nina, good to see you.

Nina Mitchell: Great to be here. 

Shawn: I can never seem to get this straight myself but what are the pros and cons of leasing versus buying a car? 

Nina: So, when you're deciding between buying or leasing a car, there really isn't a one size fits all best answer. So, let's kind of look at the pros and cons. Buying a car with a conventional car loan is pretty straightforward, you basically pay a principal and interest on the entire cost of the car and at the end of the loan, you own the car and you've got no restrictions. Over the long term, you're going to save money if you buy and hold that car for many years, but the biggest drawback is really the higher down payment and the higher loan costs. 

So let's switch gears and look at leasing which is definitely gaining in popularity and the biggest reason why people lease is because it's more of a lifestyle choice. They get to drive a new car with all the latest gadgets for every two or three years and the down payment and monthly lease payments are lower just because you're paying for the cars depreciation not the entire car. But some of the negatives to leasing; first of all you have no equity in the car and you're going to lease -- if you least one car after another you're going to have monthly payments forever and the other thing is that the mileage is typically limited to twelve thousand miles a year, so there's always excess mileage costs if you go over that, which can be expensive. And then lastly, if you don't properly maintain your car and keep it in good condition, you could face an excessive wear and tear charges at the end. 

Tweet

Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to wtop.com and search Her Wealth.

Sign up to receive the guide

Consider this your training manual to get and stay financially fit for life!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form
Dawn Doebler, MBA, CPA, CFP®, CDFA®, Senior Wealth Advisor

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.