Buying A Car: Lease, Loan Or Cash?
I need a new car but have not quite saved all the money. I was thinking of taking a loan since interest rates are low, but a friend suggested leasing is a better option. What’s the smartest way to go?
Samantha, 61, Richmond, Vic
Car loans and leases are expensive. Both are packaged up with all sorts of potential savings but because the interest rates are usually in the double digits – much higher than the cash rate, which is currently less than 1 per cent – you end up paying a lot more for your car. I did a business case on this in my book The Joy Of Money and it demonstrated that buying anything with borrowed money at high interest rates always raises the real cost significantly.
If you are close to getting the cash together, the smart option is to save the last little bit and pay with that cash. It’s also important to shop smart when buying a car. Prices are flexible, so negotiate hard. Another good way to save money is to consider buying an ex-demo car on which you can get a discount.
By Kate McCallum, financial adviser and author of The Joy of Money; multiforte.com.au
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