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?
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.
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.
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.
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?
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.
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?
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.
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.
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?
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.
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.
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 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.
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