Purchasing a New Vehicle: Lease Vs. Buy by Brad

Essentially, Leasing is just an alternative way to finance a new vehicle. We know that when purchasing a new vehicle the down payment, sales tax and license fees are required to be paid up front. However when leasing a new vehicle you are required to pay only the first monthly payment, a security deposit (usually same as monthly payment), and the license fees. The sales tax (which is based on the capitalized value of the vehicle) is actually amortized over the term of the lease in most states. In other words, the taxes are included in the monthly payments.

Capitalized Cost

Essentially the capitalized cost of a new vehicle is the actual price you have agreed to pay for the vehicle.

Gross Capitalized Cost

The gross capitalized cost of a new vehicle includes the selling price of the vehicle (which is the capitalized cost plus acquisition fees, extended warranty, accident & health insurance, dealer title fee, payoff on your trade-in, credit life insurance, gap insurance and any other fees the dealer decides to charge you). Buyer beware; that most people really don't ever know what their capitalized cost is because it is buried within the gross capitalized cost and the dealer doesn't actually reveal this number unless he has to. Most car deals made at auto dealerships are negotiated on the basis of payment rather than price. This applies to both leasing and purchasing. Don't get caught in this trap! Make the dealer reveal the selling price for every payment offer he makes you!

Adjusted Capitalized Cost

The adjusted capitalized cost of a new vehicle is the gross capitalized cost minus (-) your down payment, net trade-in amount, rebates, license fees and taxes along with any other deductions given.

Depreciation/Residual

When purchasing a new vehicle your payments are based on the full value or selling price, plus extended warranty, tax & license, minus (-) rebate, down payment and net trade-in value. However, when you lease a vehicle your payments are based only on the "depreciation or your use" of the vehicle during the entire term of the lease. The depreciation is actually only a portion of the capitalized cost of the vehicle and is determined by the term of the lease, number of miles driven and condition of the vehicle at the end of the lease. The payments on a lease are based on the deprecation money factor (which is a form of interest rate) and the amortized taxes. Therefore, you can actually drive a more expensive vehicle with a lower payment if you lease. Please note that the depreciation is actually estimated and set at the inception of the lease.

The residual is the portion or balance of the adjusted capitalized cost after the deprecation has been deducted. The residual is just put aside in limbo until the end of the lease. The higher the residual - the lower your monthly payment. At the end of the lease you have two options. You can either turn the vehicle back into the bank or leasing company, or you can buy the vehicle outright for the residual balance. You can even refinance the residual. But keep in mind if you turn in the vehicle with more mileage than allowed on your contract, you will be charged any where from .12¢ to .25¢ for each extra mile. In an auto lease you are limited to a specific number of miles in your lease contact. The average would be from 12,000 to 15,000 miles per year. You may drive any number of miles in any given year but you cannot exceed the number of allotted miles or you will be penalized. If you purchase the vehicle the charge for the extra mileage will normally be waved. Most banks and finance companies will allow you to add an extra 15,000 to 20,000 miles to your lease contract depending on the term of the lease. However, the cost of the extra miles will be added to your gross capitalization cost and your monthly payment will be increased accordingly.

Ownership

When you have entered into a lease contract you cannot terminate the lease or turn-in your vehicle prior to the ending date of the contract. If you do this the bank will report this as a voluntary repossession on your credit record. On an auto lease the vehicle is actually registered and titled to the bank or leasing company. Therefore you do not own the vehicle, the bank does. You get to use the vehicle and are legally responsible for the upkeep and maintenance. Please note, if you don't maintain the vehicle during the lease you will be penalized for all excessive wear-and-tear when you turn it in. Also, if you really needed to get out of your lease you can buy out of the lease if you can get the financing or you can get someone to take over your lease. Of course, they will have to qualify.

Vehicle Warranties

The average new car warranty is 36 months or 36000 miles, which ever comes first. It is not recommended that you enter into a 4, 5 or 6 year lease contract because they are not economical. Even with a four-year lease it is common for the residual to be higher than the actual value of the vehicle at the end of the lease which makes it very hard to refinance. If you are like a lot of people you can lease a new vehicle every 2 to 3 years and never have to buy an extended warranty. The only time it would be beneficial to buy an extended warranty is if you knew you were going to buy the vehicle outright at the end of the lease.

Gap Insurance

Gap Insurance is basically insurance coverage on the difference between the actual value of your vehicle and the balance you owe on the lease including the residual. This kind of protection is needed in case your vehicle is involved in an accident and is declared a total loss. Gap Insurance is important especially for people who lease vehicles. The lease on a vehicle is actually designed for the balance owed to be upside-down in relation to the actual value of the vehicle until approximately the end date of the lease term. At this time the residual should fall in line or be equal to the vehicle's actual value. Gap Insurance is good for purchase financing as well. The gap is not as large as in leasing, but you still stand the chance of having to put out a great deal of money.

Final Advice

Remember, there are two main factors you must consider when you are thinking about leasing an automobile. The first is how long you intend to keep the vehicle and the second is how many miles you travel annually. If you intend to keep the vehicle a maximum of three years and you only average 15,000 miles a year, then you should definitely consider leasing. If you want to keep the new vehicle for more than three years, you should consider purchasing.

When you lease a vehicle, you very rarely have to put any money down, so lease a new vehicle every two to three years and you won't owe any money on the old vehicle, plus you'll never have to buy an extended warranty. Also, you will have spent a ton of money less for each vehicle than if you had purchased them. If you want to keep a vehicle longer just buy it at the end of the lease.

Remember, don't let the dealer try to sell you on the basis of payments. Negotiate on the price only and when you have agreed on the price then tell them you have a trade-in. When you have agreed to your trade-in value then tell them you want to lease the new vehicle. Now you know what to do from here. Also, dealerships have a tendency to quote lease payments without the monthly tax. This makes a big difference in the monthly payments. If you don't control this you will be sadly surprised when you go into the finance manager to sign the paperwork. One more thing - when you are signing the lease contract, be sure to verify that the trade-in value you have agreed upon is actually deducted from the capitalized cost. Otherwise the dealer could wind up purchasing your trade for pennies and you would never know.

Visit My site http://www.autopurchasesecrets.com for more free information on the secrets the dealerships don't want you to know.

About the Author

Brad spent thirteen years in the Automobile business, specifically auto sales and worked for several Dealerships. He held positions from Retail Salesman up through New Car Manager and Fleet Manager. During this period Brad received an excellent education on what goes on inside the Automobile Dealerships. You can visit and communicate with Brad at his website http://www.autopurchasese

Volkswagen Sees Increased Sales In China by Anthony Fontanelle

German Volkswagen Group expects to sell more than 800,000 vehicles in China this year, encouraged by its strong sales in the first half.

The projection, made by Volkswagen's China chief Winfried Vahland, is up from 711,298 units it moved in the world's fastest-growing major auto market in 2006. Its January-to-June sales on the mainland and Hong Kong rose 24.6 percent year-on-year to record 431,369 units, including 379,705 Volkswagen-brand cars, 49,267 Audi vehicles and Skoda 2,274 units.

The German company's record sales figure is likely to help it remain the top seller in China's passenger car segment though its rivals, such as the General Motors Corp. and the Toyota Motor Corp., have yet to disclose their first-half results in the territory. "This (record sales) indicates that our 'Olympic Program' has been yielding good results in China," Vahland said in a recent interview in Beijing.

Volkswagen, the sole automotive partner of the Beijing 2008 Olympics, flagged off the program in 2005 to launch 12 to 14 new models by 2009 in China. The automaker also intends to cut costs by 40 percent by 2008 and to improve sales and service networks.

Vahland predicted that China's entire passenger car market would reach five million units this year, up from the company's previous forecast of 4.6 million units. In 2006, 4.2 million passenger cars were sold in the country. "However, we will not slacken our efforts to cut costs and improve customer satisfaction, although we performed well in the first half," he said. He warned that interest rate rises and soaring oil prices in China are likely to have a negative impact on the car market.

The VW turn signal alerts the automaker to a greener pasture. The German automaker now runs a joint venture with First Automotive Works Corp in the northeastern city of Changchun. The venture is responsible for the production of Bora, Caddy, Jetta, Golf and Sagitar, as well as the Audi A6 and A4. Additionally, the venture will launch a 1.8-liter turbo Magotan sedan next week.

The Mangotan also features Fuel Stratified Injection in nearly every petrol version. It ranges from 1.6 to 3.2 L, but the multivalve 2.0 L TDI is the most sought out version in Europe. In the United States, it features a 200 horsepower 2.0 L turbocharged I4 as the base engine, or a 280 horsepower 3.6 L VR6 engine as the upgrade and six-speed manual and automatic transmissions.

An Tiecheng, the venture's general manager, said that it plans to roll out at least two new models under the Volkswagen and Audi marques annually in the next five years to lure increasingly sophisticated auto purchasers.

The VW Mangotan, also called the Passat, follows the latest design philosophy first introduced on the VW Phaeton luxury car. The new styling is a dramatic departure from the styling of the B5.5 Passat. Although the new design using improved VW parts is somewhat controversial, sales have improved over the old model.

For the full year, VW, which operates car manufacturing ventures with leading Chinese auto maker SAIC Motor Corp. and FAW Group, aims to increase its sales by roughly one-fifth and maintain its 17 percent share of the world's second-largest auto market, a senior company executive said.

The venture will have a "minimum" profit growth of 25 percent this year from 2006, said Joachim Wedler, its vice-president in charge of finance. But Wedler did not reveal how much the firm, in which FAW holds a 60 percent stake and Volkswagen 40 percent, will earn this year.

The Wolfsburg-based company is one of the world's biggest producers of passenger cars and Europe's largest automaker.

About the Author

Anthony Fontanelle is a 35-year-old automotive.buff who grew up in the Windy City. He does freelance work for an automotive magazine when he is not busy customizing cars in his shop.

buy a car by jay pleas

Buy a car anytime you want, but I would tell anybody today that applying for a car offline is one of the worst and tiresome things I have done in my whole entire life. There was a man trying to explain the rates to me in a rushing manner. He even tried to force a particular car on me that I didnt even want, and the finance company that they deal with tried to push my rates close as 13 percent which is outrageous. I felt like I was being suckered into a deal so I turned towards the internet to get some information which is the best way to be successful in buying a car in todays world in my opinion.

I searched for days online looking for some great resources. There were many websites that showed you how to buy a car, but I needed to know the important points when I buy a car. Finally, I came upon some great websites that shows you everything that you need to know in order for you to apply yourself to buy a car successfully. I learned a ton of things, such as, the great loan company that I talk about on my website that you can easily apply for to buy a car anytime you want. What I liked about that loan is the rates and the time it takes for you to get a loan. It takes up to 24 hours for you to get a loan from them and the rates is the best on the net. The rates are very low. You would pay 7 percent at the most. Take out a loan because if you financed through a car dealership you probably would have to pay 9 or 10 percent interest rates to buy a car through a dealer.

When I was searching for a car, I also tried the car quote websites that, and they are great. I simply filled out the form and got quotes back to back in no time. There is four different websites for you to choose from or compare together. First I used edmunds, which is a pretty coo carl quote website, but personally, I like the other free car quote websites because it's easier to operate and quickerto obtain. You will get back some car quotes back in the same day. I used this for myself because you can make an educated decision of what price you can afford, and make or model of the cars. You can have local dealerships calling you to buy a car that fits your budget.

You can buy a car cash if you want. After I bought my car, I discovered some great auction services that allows me to buy a car from my own state and area. This is my main source when I buy a car now. The great news about buying auctioned cars is that you can get some really nice updated, running cars really cheap in your own local are. The bad news is that you have to react on these deals quickly in the process. I have posted some great car auction websites for people who want to buy a car cash instead of paying monthly rent. These are my jewels that I use here on out. I no longer have car bills to pay. I use most of my time buying 3 cars a month and selling them for a little more. Alot of the cars that are offered on the sites are in tip top shape. Many of the cars are under $1000. It's really easy to navigate your area. All you do is type in your area code and it shows you all the auctions going on in your area, contact info, etc.

***Remember before you buy a car to check and make sure mileages and price matches correctly. Check out my website and see how I calculated this for myself and do it for yourself too.***

About the Author

My name is Jay Pleas. I'm an auto mechanic and interior designer that spends most of my time buying autos and detailing them for many customers. At this time I make $100,000 a year maintaining my own car interior buisness. I live in Florida. I'm 28 years of age

www.squidoo.com/buy_a_car