What’s the best choice?
Now test your judgment: Carla is about to get a truck. Given her situation, which one these three possible options do you think is best for her?
Carla has her own landscaping business and plans to get a pick-up truck. She’s been considering a brand new one, but the same dealer has a used one in good condition with low miles. She has enough cash to buy the used one, although that might mean paying some of her bills late for a few months and a delay in buying new plants. Three years from now, she’d like to give the truck to her daughter, who will be turning 16.
Scenario: Result
See the real-world consequences of your choice and read the coach's commentary.
“I think I made a mistake! Even though I own the truck and I’m not paying loan interest, now I’m broke. I can’t buy as many plants as I need and I’m worried that paying my bills late is going to hurt my business and my credit rating!”
If Carla had plenty of cash to spare, she could own the truck right away, and she’d save on loan fees and interest. But if this purchase requires so much cash that she can’t pay her other bills, then a cash purchase really isn’t an affordable option.
Scenario: Result
See the real-world consequences of your choice and read the coach's commentary.
“I feel good about my decision. I saved money by buying a used truck instead of a new one. The down payment I made allowed me to get a 36-month loan with payments I can afford. When I make my last loan payment three years from now, I’ll own the truck and I can give it to my daughter—just like I wanted!”
Since new cars, and many used cars, can have high price tags, most people get a car loan – and it’s a good strategy for Carla. But remember: she’ll have to pay interest and fees for the loan, and she won’t own the truck until she makes her final loan payment.
Scenario: Result
See the real-world consequences of your choice and read the coach's commentary.
“I don’t know if I did the right thing. The down payment was small and maintenance costs are included in the lease agreement. But I think I’ll end up paying extra because of the number of miles I drive. And when the lease is up, I won’t own the truck. I’ll have to buy it from the dealer if I want to give it to my daughter.”
Leasing may enable Carla to drive a brand new truck for not much money upfront, but when all factors are considered, leasing is frequently more expensive than making loan payments and buying a vehicle. Monthly lease payments may be lower or higher than a loan, so it’s important to comparison shop.
For more information about loans and credit, see Using Credit to your Advantage. Click the Next button to continue.