BY Margaux Buridant Vice President, Senior International Wealth Strategist, Bank of the West

Sep 13th 2020

International Perspectives

Should You Buy or Lease a Car? A Guide for Expats

Sep 13th 2020

It’s no secret that the United States is a country that loves cars. Ever since the dawn of the Model T, the American love affair with the automobile and open road has been a defining feature of the national identity. So how will a car fit into your American adventure?

Aside from the obvious—and fun—question of which model and color you like best, there’s the important decision about how you’ll acquire the car. Will it make more sense to buy it, either with cash or a loan, or lease it for a set period of time?

Let’s take a look at the pros and cons of each approach.

Why Might Buying Be Best?

Control

When a car is yours, you can do whatever you want with it. Drive as many miles as you please, change it however you like, cover it with bumper stickers from your favorite team back home or in the US—it’s all up to you. When the loan is done, there are no more payments, and the car is yours to keep.

Flexibility

Not sure whether you’ll need a car for one year, three, or nine? Buying a car means never having to worry about someone else’s timetable. Whenever the time comes, you can sell it to someone else using a dealer or any of the numerous online marketplaces.

Financing Options

With today’s exceptionally low-interest rates, you might want to take advantage of a low-rate loan and save your cash for other investments or expenses. Dealerships generally won’t be able to provide loans to expats without a US credit history, but a limited number of banks, including Bank of the West, can provide flexible financing for expats.

Tax Savings

In some states, it may be possible to get a credit on your taxes if you purchase an electric or hybrid vehicle, which can help shrink your carbon footprint, too

Why Might Buying Be Problematic?

Maintenance Expenses

If you own the car, you own its upkeep, too. When something goes wrong, you pay the bill. You’ll have to balance the choice between a newer, more expensive car that comes with a comprehensive warranty, and an older, used car that’s cheaper to buy, but may develop more problems down the line.

Selling Hassles

When you’re done with the car, you’ll have to find a buyer, possibly in a hurry, and it’s hard to know how much the car will depreciate in the meantime.

Higher Short-term Cost

Since you’re working toward permanent ownership, not just temporary usage, the monthly payments might be higher than leasing until the loan is paid off-typically four to six years.

Why Might You Want to Lease?

Convenience

With a lease, the terms and duration are spelled out upfront. There’s no negotiating with salespeople or worrying about what to do with the car when you’re done. When the agreed-upon contract ends, you return the car and move on.

Variety

If you’re the kind of person who trades in for the latest phone the day it comes out, leasing could be your ticket to a new car every year, adding excitement to your stay in the US And because the payments are typically lower than with ownership, you may be able to afford a higher-end car.

Fixed Cost

Part of what you get for your monthly price is peace of mind. If the transmission fails, it’s not your responsibility. As with renting an apartment, if something goes wrong, someone else has to fix it.

Why Might You Think Twice About Leasing?

Rigid Terms

Typically, lease terms are inflexible. If you have to leave the country before the lease is up, you might be responsible for a steep early-termination fee. Similarly, if you want to extend your stay by a non-standard amount of time, a lease might not align with your plans.

Restrictions on Use

Leases have strict rules on what you can do to the car, how many miles you can drive, and the condition you have to return it in. If you put a small dent in the bumper of a car you own, you can choose to live with it. If it’s a lease, you’ll have to pay to fix it.

Upfront Costs

Even though you’re not buying the car, you still have to pay a high acquisition fee. You may feel like that money would be better spent somewhere else.

No Equity

Unlike buying, where the payments eventually end, leasing means making payments indefinitely, without ever having any assets to show for them.

Still Unsure How to Proceed?

At Bank of the West, our international advisors have helped many expats think through this decision, including how it relates to your overall financial life in the US We can also go over specific financing options so you have a clearer sense of how your options stack up.

And there’s no harm in taking a test drive or two to see if you’re gravitating toward one option or the other. No matter what car you choose, rest assured there are plenty of ways to get you behind the wheel quickly, on the terms that work best for you.

Disclosures

All content provided on the Bank of the West Blog is for informational purposes only. It is not financial, investment or tax advice. If you need financial, investment or tax advice, you should contact a qualified professional.

To comply with the Internal Revenue Service and other applicable tax practice standards, any tax information and advice contained in this blog is not intended or written to be used, and may not be used, for purposes of avoiding tax penalties imposed under the United States Internal Revenue Code or for the purpose of promoting, marketing or recommending to another party any tax-related matters

Bank of the West, including any of its affiliates and subsidiaries, does not provide tax or legal advice. Please consult your tax or legal advisors to determine how this information may apply to your own situation.

This information is given without regard to the specific investment objectives, financial situations, or particular needs of any person who may review this article. The discussions and information contained herein should not be construed or used as a specific recommendation for the investment of assets of any customer of Bank of the West or its affiliates and is not intended as an offer, or a solicitation of an offer, to purchase or sell any security or financial instrument, nor does the information constitute advice or an expression of the Bank’s view as to whether a particular security or financial instrument is appropriate for you and meets your financial objectives. Investors should seek financial advice regarding the appropriateness of any securities or strategies mentioned here. Bank of the West does not guaranty the results obtained from use of any information contained in this blog and will not be liable for any investment decision based in whole or in part on the information contained herein. Bank of the West nor its affiliated entities shall be held liable for any content, regardless of cause, or the lack of timeliness of, any information contained in this article. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION IN THIS BLOG OR FROM ANY “LINKED” WEB-SITE.

Investing involves risk, including the possible loss of principal and fluctuation in value.

Diversification and asset allocation does not ensure a profit or guarantee against loss.

Bank of the West Wealth Management offers products and services through Bank of the West and its various affiliates and subsidiaries.

Securities and variable annuities are offered through BancWest Investment Services, a registered broker/dealer, Member FINRA/SIPC, and SEC Registered Investment Adviser. These products are offered by Financial Advisors who are registered representatives of BancWest Investment Services.

BancWest Investment Services is a wholly owned subsidiary of Bank of the West. Bank of the West is a wholly owned subsidiary of BNP Paribas.

Investment and Insurance Products:

NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
International PerspectivesRead Next