Financial Advice Q&A

New Member
csodude
Posts: 1
Question
Should I buy or lease?
[ Edited ]

I'm thinking about leasing a new car once I commission in May. What advice do you have on that? Is it a bad idea for someone in the military?

Other Answers: 1
Community Manager
JosephMontanaro
Posts: 62

car sports shutterstock_92974027[1].JPG

 

I don't thinking leasing is a bad choice for someone who is in the military, in fact, it may have a hidden advantage...more on that in a moment.

 

In my "perfect financial planner's world," everyone would buy an affordable car, drive it for hundreds of thousands of miles, all the while saving and investing the payments they weren't making on the car they didn't have to buy or lease because they drove what they had til the wheels came off. Whew...got that all out.

 

Anyway, that hasn't been my reality, and I know lots of other folks who could say the same, so let's look at a few points that can help you as you make your car decision.

 

Know yourself. Leasing works best for someone that knows they are going to want a new set of wheels every two or three years. Cars depreciate fairly quickly and if you're going to be getting a new one every couple of years, you'll probably be dollars ahead going with a lease.

 

Be prepared to pay forever. The monthly payment for a lease will typically be less expensive than buying the same vehicle, but of course unlike a loan there won't be a time when you don't have a payment.

 

Mileage and modifications are limited. Leases typically have an annual mileage limit. If you exceed that limit, you'll be hit with a per mile penalty and if you plan on making major modifications to the vehicle a lease is probably not the way to go. 

 

Treat it gently. Unlike a car you own, when you turn in your leased vehicle it will be subject to inspection and potential charges for "excess wear and tear."

 

 

One aspect of a lease that's unique to the military is related to the Servicemembers Civil Relief Act. The SCRA allows active duty service members terminate an automobile lease if the receive deployment or PCS orders outside of the continental US of at least 180 days. That could tip the scales in favor of a lease. Finally, remember that while the terms are a bit different (capitalized cost, money factor, residual,etc.) the idea that you need to negotiate your best deal remains the same with a lease.  Good luck and shop smart!

 

JJ

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