Car Buying Advice from the Tax Experts

If you are in the market for a car then you need to decide if you want to buy or lease. There are both valid reasons to buy & lease, but it really depends on your current monetary situation. For most people, the most cost-efficient purchase would occur by purchasing a used car with cash. Yet, even a clunker will cost several thousand dollars, so it’s not an option for everyone.

Why Lease Your Vehicle?

One key benefit to leasing a car is the lower monthly payments. While monthly payments on the purchase of a car are based on the purchase price, monthly payments on a lease are based on the car’s depreciation during the period you’re driving it. This means that an older car will have lost most of its value, thus having a low monthly payment. Depending on your credit score and the company you lease from, you might be able to secure a lease with a minimal down payment. A low down payment does mean higher monthly payments, but you will never own the car so there is little benefit to putting a lot down. Every lease agreement is different. With a lease you may be able to avoid repair and maintenance payments. Even if you are on the hook for these costs, a newer lease will require fewer repairs than an older purchased car. Leasing is the preferred option for consumers who require a nice new car for their work, or who don’t want to commit to the same car for a long period of time.

Buying or Financing

Financing the purchase of a new car will not be cheaper than leasing in most cases, but it does lead to a paid off car that you own. If your goal is to get away from monthly car payments then a lease should not be considered. Financing a used car will likely require a down payment around 10% to 20% of the purchase price but compared to leasing a new car, it may be significantly cheaper. On the other hand, securing a lease generally involves a down payment, the first month’s payment, and a dozen other fees.

New car purchases often come with a warranty to cover unexpected expenses, and when the car is payed off you can budget for maintenance payments instead of car payments. If you drive a significant amount every year, you will likely want to avoid leases because of their mile limitations. If you exceed your lease’s allowed mileage you can be charged a fee based on how many miles you’ve gone over or even charge an amount for each mile. High mileage devalues a car, but ownership gives you an opportunity to sell or trade in your car before it breaks down or becomes expensive to maintain.

Consumer reports suggests the average new car will last about eight years or 150,000 miles. Of course, this all depends on the car and how well it is driven and maintained. In most situations, financing a used car at a reasonable price is the better financial situation, but there are plenty of reasons to prefer a lease. Not being able to afford your monthly payments will lead to a car repossession which can be a financial disaster. However, if you choose to proceed you should read the terms of the finance or lease agreement and be sure to make an educated decision.

Before you decide on making your lease or purchase give us a call and speak with your tax expert. You can also view our other blog posts for great tips and insights. Here you can view some of the best apps to help manage your finances: https://molentax.com/7-best-apps-for-managing-your-money/. At Molen & Associates we can offer you insight and help you decide which financial decisions will be most beneficial to you.

Austin Long

Tax Advisor

 

http://www.nbcnews.com/id/12040753/ns/business-consumer_news/t/whats-life-expectancy-my-car/#.Xc3F3dVKiUk

https://www.reddit.com/r/personalfinance/comments/9wdovd/should_i_buy_or_lease_a_car/

https://www.creditkarma.com/auto/i/lease-vs-buy-car/

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Should I Open an HSA?

Should I Open An HSA Account? Are you considering a Health Savings Account (HSA)? If so, it is vital to understand what exactly an HSA entails. With this guide, you'll learn all about it: the advantages of an HSA and how it can help you manage your medical expenses....

Personal Finance Tips for Young Adults

As someone who has been working for most of their life, I wish there was someone out there who had shown me the correct way to save money for my future. Now that I am in my 30s, I have been getting better at saving money, but there are some personal finance tips that...

How to Track Expenses

There are many different methodologies, tools, tips, and tricks for tracking expenses, and it ultimately depends on your lifestyle and how actively and accurately you want to track them. This is information I’ve pulled from other sources and compiled into a few...

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Request an Appointment Today

6 + 8 =

Call us at

Pin It on Pinterest

Share This

VOTE FOR

MOLEN & ASSOCIATES

FOR BEST TAX FIRM

As part of the Houston Chronicle's "Best of the Best" Competition 2023

You can vote every day from March 27th to April 10th