How about leasing a car?
Is your 2009 BMW getting stale? Got your eye on the new 2012 Mercedes? Hopefully you’re not blowing money like that as a college student. But if you are the type who can afford the luxury of getting a new car every few years, leasing may be right for you. It is far simpler than buying and selling every few years and not necessarily more expensive. You can use the depreciation component of Edmunds.com’s “true cost to own” calculator to compare the annual cost of leasing versus the annual loss of value due to depreciation over a period of up to 5 years.
When you lease, you don’t have to worry about a lot of things that buyers (especially of used cars) have to concern themselves with. You know the car is in new condition, everything should be under warranty, lease approval is simpler than loan approval, and major repairs are less likely to be needed.
Your lease price will be based on the car’s sale price. If you have not negotiated the car’s sale price beforehand, your lease price will be based on the car’s MSRP (manufacturer’s suggested retail price). You don’t have to pay that much. There is always room for negotiation. Either negotiate a lower sale price before revealing that you prefer to lease, or insist on lease payments based on a lower sale price.
Down payments or signing payments are sometimes required and sometimes optional. Such payments will decrease the size of your monthly payment. If you are financially flexible and good at math, you should figure out what the effective interest rate would be on extra money paid monthly rather than put towards a down payment. If the interest rate is low enough, you may be better off investing your money rather than making a larger down payment.
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