Used car loan nashville

Even if you want to own a brand-new '99 "lease now, buy later" could be your ticket to the best deal.

Isn't it ironic? The average car price fell during the 1998 model year--by 1.1%. As 1999 models roll into showrooms, Ford is actually trimming overall prices, GM is holding the line and Chrysler is pushing an infinitesimal 0.1% increase.

Foreign carmakers, stuck in the world's economic doldrums, are in the same boat. Mazda is shaving the sticker price on its new luxury Millenia S by $5,550, or 15.2%, and knocking 4.1% overall off its 626 and all-new Protege cars. Other Asian manufacturers kicked off the new-car season with the kind of cost-cutting incentives normally reserved for later in the model year.

"Automakers have no choice," says William Wilson, an economist for Comerica Bank in Detroit. "They're forced to lower prices to promote sales."

The combination of steady or falling prices, lower interest rates and rising family income is making new automobiles more affordable today than at any time in 18 years, according to Comerica economists.

So here's the $64,000 question: If cars are so darned affordable, why do so many buyers have the urge to run screaming from the showroom when they confront the monthly payment for a new-car loan?

Consider the jaunty Chrysler 300M, a car that trades on the mystique of the company's performance cars of the 1950s and 1960s. If you cut a $29,000 deal on a well-equipped model, put 10% down and get an 8,5%, three-year loan, the monthly payment will be $824--about as much as the 30-year mortgage payment on a $160;000 house. Stretch the car loan out to four years, and you're still facing a monthly payment of $637.

That's affordable? Imagine, if you dare, the payments on a $49,000 Cadillac or a $65,000 Mercedes.

Regardless of what the statistics show, few of us are able, or willing, to slip a $600 or higher car payment into the family budget. What about leasing that $29,000 Chrysler? On a 48-month contract, the monthly payment would fall to $461--steep, yes, but 28% less than the four-year loan.

The year of the lease

Numbers like that explain why leasing is likely to be bigger than ever this year. Of the 15 million new cars and trucks that will roll out of showrooms, more than one-third of them, 5.4 million, will be leased. When it comes to vehicles costing more than $40,000, 61% will be leased, according to Art Spinella, general manager of CNW Marketing/Research, in Bandon, Ore.

Joann Curcio is one happy convert. When first smitten by GMC's luxury sport utility, Curcio, 28, looked at the Yukon Denali's $43,000 price tag and made a quick decision. She earns a comfortable living as regional vice-president of a Long Island mortgage-banking company, but there was no way she was shelling out $850 a month--what the vehicle would cost with a four-year loan.

"I'd rather put money into my house than deplete my savings to pay for a car that depreciates right off the bat," says Curcio. "I know the present value of money, and that's why I'd never put $10,000 down on a car. When you lease, you're a lot better off." There was no down payment on her 24-month lease, for which she pays $597 per month. "In two years, I can walk away from the car and into another if I want to," says Curcio.

Aha, you're saying. She'll own nothing at the end of the lease and have nothing to show for $14,000-plus in payments. Everybody knows leasing is far more expensive than buying, and the payments never end.

But that ain't necessarily so. To go into the 1999 car market with your eyes open, you may need to forget some of the things you know about leasing.

"There are three or four key misconceptions which make up the core reasons some people shy away from leasing," says Cedric Rashad, head of the Rashad Group, a leasing consulting firm in Atlanta. Some of those deep-seated myths are well founded in abuses of the past. But the market is different now. For one thing, federal law demands that the key terms of a lease be openly disclosed.

MYTH #1: Leasing a new car costs far more than buying it. A hard look at the numbers reveals there's more parity than most people realize. Just as the lower monthly payments don't automatically make a lease vastly cheaper, neither does the fact that you own nothing at the end of a lease mean you're throwing your money away.

To compare buying and leasing fairly, you must take into account the economic power of money you don't put into a down payment or sky-high monthly payments on a purchase deal.

Eileen Stuckey doesn't consider herself a spendthrift. In fact, she thinks she got a good deal on her 1999 Mercury Cougar. The 33-year-old Marlton, N.J., loan officer is paying $381 per month on a 33-month lease. If she had purchased the car for $18,800 (the price built into the lease) with a 33-month note at 8.5%, her payments would have been $132 more $513 per month. At the end of the lease, Stuckey can buy the car for $10,182.

If she had bought the car new, her out-of-pocket cost after 33 months would be $20,679. So if she buys the Cougar at the end of the lease, she will have shelled out $22,775. At first blush, she's about $2,000 behind.

But if she saved the down payment and the $132-per-month difference between loan and lease payments, Stuckey would earn about $860 in interest (assuming an annual 5% after-tax return), still leaving her about $1,200 behind. If she invested the difference at 10%, though, the gap falls to $244. That's just $7 a month over the course of the lease--not bad for insurance that lets her turn in the car at the end of the lease if she doesn't want to keep it.

You don't necessarily have to invest the money to come out ahead. Using cash freed up by a lease to pay down debt can be an even better deal. Paying off a credit card balance that's costing you 18% a year is like investing at that rate. "Even if you're using the money for another purpose, it has an implicit value," says Randall McCatheren, of Bank Lease Consultants, in Nashville, Tenn. "Going but to dinner instead of strangling your spouse has a value that is equal to or greater than 17%."

Other factors give a lease a leg up on a purchase. For example, most leases include free gap insurance, which covers the difference between the lease payoff and an insurance settlement if your car is totaled or stolen. It's unlikely you'll find that kind of protection when you buy an automobile. It it's totaled, the difference between the balance due and the insurance settlement comes out of your pocket.

MYTH #2: A lease consigns you to everlasting payments. It's common knowledge that leasing makes sense only for those who get a new car every two or three years, those masochists who hit the showrooms as soon as a loan is paid off. The corollary is that if you love the no-payment years of owning a car you should scorn leasing.

Whoa. Not necessarily. If you want to buy the car at the end of the lease, your contract will give you a right to do so--at a set price. And as the example above shows, you wouldn't be a chump if you went the "lease now, buy later" route. In fact, it affords you some protection. If you no longer want the car at the end of the lease, you can just walk away. If you had purchased the car new, you'd be stuck with selling it or trading it in, and there's no guarantee of how much money you'd get.

MYTH #3: Excess wear and teat charges ate unfair. Not so. These charges are designed to make you pay for your (over)use of the vehicle. You'd face the same financial hit if you had purchased the can Dings in the door or tears in the upholstery would cut into how much you'd get when yon traded it in. The charge on a lease is more in-your-face, but the financial pain should be about the same.

But don't leasing companies pile on charges tot wear and tear? No, says Jerry Mahoney, who provides leasing for American Automobile Association members. "If anything, they have become more lenient, giving the consumer the benefit of the doubt."

MYTH #4: Early-termination fees exact a far heavier penalty than if you change your mind when you buy a car. It only seems that way. If you decide to bail out of a car purchase, you'll pay the piper, too. The car may be worth Jar less than you still owe on the loan. And because depreciation is spread evenly over the term of the lease, if you turn in the car early, you are sure to have "used up" more of the car than you've paid for, particularly if you made no down payment. The early-termination fee is the way the dealer evens things up. Moral Plan to keep your car to the end of the lease. It's a fool's errand to stretch out the term to get lower payments if you're likely to break the lease early.