First ask yourself, do you want to keep the car for 10 years or will you get bored of it after 2 or 3.

Whether they realize it or not, most car buyers fall into one of two categories: let’s call them the new-new, and the lifer. One likes fresh tech, modern features, and loves that new car smell. The other likes familiarity, simplicity, and lives by the “if it ain’t broke” philosophy.

If you’re a new-new, chances are wandering eye syndrome will begin to set in for you around the 12 month mark. That car you were so excited about just a year ago starts to seem dull, especially when there are so many newer, shinier ones. And you’re not alone - most new car buyers feel this way. After all, the automotive industry is built around you having this very feeling; it’s what makes automakers some of the wealthiest corporations on the planet.

The lifer, on the other hand, does a better job of ignoring the urge. Some may not be affected by it at all. Hundreds of millions of dollars in annual marketing efforts will do little to stir you, and you’re either hyper-rational or just don’t see cars as a lifestyle product the way most others do. We can safely assume those in the latter category also doesn’t read Motor1 very often.

If you’re a lifer, or you know a lifer in search of car-buying advice, then you you should finance your next car.

Financing

Automakers now offer finance terms as long as 96 months (eight years) which make for very attractive monthly payments. The longer term loan means you’ll be paying much more for the same car than if you did a 48 month (four year) term.

To illustrate, here’s an example using the 2017 Hyundai Elantra GT in fully loaded Limited trim (figures calculated with Ontario taxes, delivery, and fees included):

 

48 months

60 months

84 months

96 months

OEM interest rate

0.99%

0.99%

0.99%

1.99%

Monthly payment

$674.32

$542.11

$391.04

$357.71

Total interest paid over term

$645.15

$804.39

$1,125.15

$2,617.95

 

While at first glance it may seem like a great idea to go for the lowest monthly payment possible - $357.71 over 96 months in this scenario - you’d be paying $2,617.95 more for the same car someone else will pay just $645.15 more for in a 48 month finance term.

Financing a car means borrowing money. And while interest rates offered through manufacturer financing can be far more attractive than borrowing from a bank or credit union, the sensible financial decision should always be: pay as little interest as possible.

The new car, once paid off, will only require your dollars to service and maintain. If you picked a good one, those maintenance costs will be low and repairs few and far between. Owning a car over the long term means a commitment to proper servicing and maintenance. If these are not a priority in your world, you probably shouldn’t sign up to be a lifer.

Leasing

If you like a new car every 3-4 years, or think regular maintenance is just a suggestion, then leasing is likely your best option.

First, you need to be honest with yourself.

New vehicles are a depreciating asset, perhaps better termed as a liability. So decide exactly what you want, and pay to use the vehicle and be liable for nothing more.

Lease terms make the most sense if kept between 36 to 48 months.

Try to keep the lease term within the manufacturer's comprehensive warranty period for that vehicle. That way you won’t be responsible for any potential repair issues. New cars are also built to go at least three to four years without needing major component replacements.

Typically, within a 36 month lease term, you will not be responsible for replacing any major wear and tear items. Factory original tires on a new car tend to last at least four seasons (especially if used in conjunction with winter tires), while brakes will last at least three years (depending on how they’re used), leaving you responsible for things like cabin air filters and engine oil changes, which are minor service items.

It’s important to know and be honest about how many kilometres you’ll drive your car each year. For example, don’t pick a low-mileage lease to save a few dollars on your monthly payments if you commute a great distance to work every day or take regular road trips. It’s better to overestimate your vehicle usage than have to pay per kilometre for every kilometre you go over at the end of your term. Do your math before you start looking at lease rates, this way you’ll be less tempted to cheat. Most North American drivers average 20,000-24,000 km per year.

Commit to your lease term. Whether you pick a 24, 36, or 48 month lease term, stick with it and walk away from the car after. Leasing your vehicle and then buying it out at the end is a sure-fire way to waste your money. If you wanted to own the car beyond the four year mark, you’re not a new-new. You should have financed.

Most of you already know this, but breaking a lease mid-way through your term is costly and is best avoided. Again, be honest with yourself in the beginning and know what you’re getting into before you sign on the dotted line.

I maintain that most people, whether or not they realize it, are new-news, so lease your car. Pay only for what you use and move on to the next one when you’re done.

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