Buying or leasing a vehicle can be confusing

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    By MICHAEL WARD

    mward@du2.byu.edu

    Deciding to buy or lease a car can be frustrating. After the initial purchase decision is made, many students will start out in a used car, but there are advantages to buying new.

    When someone buys a car, money goes toward owning the vehicle. With leasing, monthly payments go toward depreciation of the vehicle in the time you have the car.

    After a set period of time, usually two or three years, the lessee turns the vehicle back to the lessor, usually either a car dealer or finance company. Unlike buying, when a lessee leases a car they continually pay for something they will probably never own.

    Most leased vehicles are sold under closed-end contracts. Sales consultant for a local car dealer, Brian Parvin said leasing contracts are now more “customer friendly.”

    Vehicle values vary with time, so the lessee didn’t usually end up with the best deal. Parvin said most places now use what is called the closed-end lease.

    “The closed-end lease sets an amount of what the car will be worth after the lease period has expired, so the lessee knows from the beginning of the lease contract how much the car will be worth at the end (residual value),” Parvin said.

    He said with closed-end leases, the customer always gets the best deal.

    Parvin said leasing companies set certain stipulations on leased vehicles. Leased cars can only be driven 12-15,000 miles a year, must be kept in near-new condition, and cannot be altered by the lessee for better performance. The lessor wants to resell the car after the lease period.

    Bruce Killpack, sales manager for a local car dealer, said there are advantages to leasing.

    “If a person enjoys always driving a new car, leasing is probably the way to go,” he said.

    Once the lease contract has expired, the lessee has a couple of options, Killpack said.

    The lessee can turn in the vehicle lessor and walk away … no strings attached. The lessee has, from that time on, no financial responsibility attached to the vehicle, Killpack said.

    Killpack said some people who lease a car will trade the one vehicle in and begin a new lease for another car. The other option lessees have is to refinance the remainder of the cost of the car and buy the car.

    Travis Lee, 24, a junior from Caliente, Nev., majoring in youth leadership/recreation management, said lease payments can seem eternal.

    “I wouldn’t suggest leasing a car, unless you like continuous car payments,” Lee said.

    Both car dealers said they sell more used cars than new cars. Parvin said many people would rather buy a used 1997 for cheaper than going with the new 1998 vehicle.

    Killpack said the advantages to buying new include the full warranty and the “new car” feel.

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