Money Green Life

Last week, I wrote about how my friend probably saved money by leasing a brand new civic for $199/mo with no money down. Yesterday, he told me that he has the option to purchase the vehicle at the end of his lease term at 60% of the MSRP price. He couldn’t remember what that number was so I went on to Honda.com and looked it up. Let’s just assume that his car is a brand new 2010 Honda Civic DX, priced at $17,205. Couple adys ago, I saw a Honda commercial that outlined $199/mo lease for 36 months or 0.9% financing. So, let’s compare the two deals and see which one makes more financially sense.

So according to the table above, financing makes more sense over leasing. You would save about $200 over the course of 36 months. If you’re able to sell it for more than 60% of MSRP, then even better. But let’s also consider the fact that you’ll be paying $285.58 less every month by leasing when compared to financing. This money can be put into an online savings account, such as Ally, which currently gives 1.29% return on your money. After every month, you deposit $285.58 into your new Ally account, you would have $10,414.53 at the end of 36 months. This earns you $133.65, meaning financing only saves you about $50 over leasing.

So, this proves that leasing is not always the better option. In the example above, it appears that there really is no big financial advantage one way over the other. Although tax, tags, and title fees are all included in the $199 monthly payment and not when financing, no one ever pays MSRP price anyway.

Bottom Line

You should lease a car if you like to drive a brand new car every 3 years or so, don’t like to pay for costly maintenance, and enjoy having lower monthly payments. You should buy or finance your next car if you need the comfort of having an ownership of your car and have plans to pay off your loan earlier to become payment-free, and understand the added costs for unexpected maintenance and repairs.

On a side note, visit Mrs. Accountability’s Outofdebtagain.com for her Yakezie Roundup this week.

A friend of mine just leased a brand new Honda Civic for $199/mo with no money down for 36 months. His limits are 36,000 miles during the leasing period with $0.15/mi for each additional miles over the limit. His commute is only 15 miles round trip per day, equating to 75 miles a week. I’m not sure what his driving habits are during the weekend, but assuming 50 miles per weekend day, that adds up to 175 miles driven in any given week. Multiply that out by 3 years and you get a total expected miles driven over the course of 36 months to approximately 27,300 miles. This gives him an extra 8,700 miles of flexibility over the course of the leasing period. Total money spent at the end of his leasing period would become $7,164. He told me that he didn’t have to pay anything else at signing, except first month payment of $199. He also told me that he’s not expected to pay any additional end of lease fees either. He may be wrong about this, but that’s what he told me. Tax and tags are included in the 199 monthly payment.

So, is this a good deal? Everyone’s situation is different, but for my friend, I believe it’s a good deal.

5 Reasons to Lease Your Next Car

1. Get a brand new car every 2-3 years, depending on your leasing period.

2. Never pay for maintenance, except for everyday wear and tear such as oil change.

3. Free gap insurance, in case car is totaled.

4. The money you saved from lower monthly payments is the “equity” you build every month.

5. Option to purchase the vehicle at the end of the leasing period for reduced price.

There you have it. Remember to get an insurance quote before you buy or lease your car. You can get free online quote from Geico or Allstate insurance. Oftentimes, a leased vehicle has slightly higher premium than purchased vehicles.

I went a little further in calculating which is better, Lease or Buy Your Car – Explained in my other post.

I will be traveling this weekend, starting tomorrow morning for the long 4th of July holiday. Driving from Baltimore to North Jersey isn’t that long of a drive, but it still is about 4 hours.  Although I’ve done this drive on many occasions, I still make sure that my car is in good condition to be driven continuously for a few hours. The last thing I want is to be stranded, unprepared for the unfortunate situation. During long trips, I also try to remember methods to increase gas mileage while driving as well. At least in New Jersey, I don’t have to pump my own gas at the gas station.

Rain-X

I always reapply Rain-X on my windshield. It helps so much when it rains. Sometimes, wipers aren’t even needed. I hate it when I’m stuck in a torrential downpour and my windshield wipers can’t keep up.

Read the rest of this entry »

Previously, I posted about how I was planning to reduce my then current auto insurance premium. Although my premium was slightly over $400 over 6 months, after reviewing the breakdown of how much I was paying for each line item, I figured I could reduce the costs by changing some of the coverage. And today, after chatting with my Allstate rep on the phone, I reduced my premium by over 20%.

The items I changed are increasing my deductibles from $500 to $1000 for my Auto Collision and Comprehensive. I also removed Auto. Medical Payments entirely as well as towing. This allowed me to save $90 in my 6 months premium.

I will post the breakdown of my new coverage when Allstate sends me the updated paperwork. Have you re-evaluated your auto insurance lately? Geico.com offers a free rate quote that takes less than 5 minutes to fill out.  You can also compare those results with Allstate free rate quote and see which one provides better pricing. They’ll show you an estimated quote instantly on your screen and will also email it you. Don’t enter your phone number unless you want to be hassled over the phone.

I plan on investigating an option to change my homeowners insurance policy to Allstate so achieve even larger discounts.  Once I have that set up, I will update you on how much more I saved.

I need help with reducing my auto insurance. It’s not like I pay super premium but I think it definitely can be lowered from what I pay currently. Let me summarize the details.

Car: 2003 Mazda 6, 100% owned
Mileage: 134,000
Roundtrip For Work: 30 miles

So, I pay over $420 every 6 months. It’s not that bad and I certainly can afford it. But I still feel that I’m overpaying. Perhaps, I’m over-insured. Let’s take a closer look at each item so you and I both can understand what we are  each paying for for our own auto insurance coverage.

Automobile Liability

When you are in a car accident, the medical bills that are incurred by the other driver and their passengers are covered under this coverage. Passengers injured in your vehicles are also covered. Property damages for the vehicles involved and other property damages caused by the accident are also covered. In my case, the limits of $100K, $300K, and 100K corresponds to bodily injuries for one person, bodily injuries for all people, and property damages respectively. I feel that I may be over-insured in this category. It accounts for 40% of the total premium but it could come back to haunt me if I skimp on this coverage.

Basically, the general rule of thumb for this coverage lies in the total assets you have. The more money you make and the more assets you have, the higher the coverage should be. If you’re a college student with minimal income and rising student loans, minimum coverage should be sufficient. The problem with this coverage is that it’s there in case you get sued by the other driver.  Even if the accident isn’t your fault, you can still get sued. If the other driver complains of back or neck pains, lawyers will find ways to sue you for hundreds of thousands of dollars.

Bodily Personal Injury Protection (PIP)

If you are injured in a car accident, this coverage pretty much bails you out. However, if you already have health insurance, having this coverage becomes redundant. I currently pay $26 for this coverage and I have health insurance from my day job, so there is definitely some money-saving opportunity here for me. However, Maryland like some states require that you carry a minimum of $2,500 PIP coverage. So, not much I can do there. You can find out about your state’s minimum coverage requirements here.

Uninsured Liability

Imagine you’re stopped at a red light and then all of a sudden, you’re rear-ended. You exchange information but you find out that the other driver is not insured at all. What do you do?? It’s exactly for this scenario Uninsured Liability exists. It covers your all accident-related bills in case you’re in a hit-and-run situation or involved in an accident with uninsured vehicle. Although nearly all states require that you carry an auto insurance, there’s always that slight chance you will run into one without insurance. I don’t think I can skimp out on this one since it’s cheap for the amount of limit covered.

Automobile Medical Payments

This coverage is very similar to PIP coverage except it doesn’t cover lost wage due to injuries. For the same reasons for not needing PIP, I think I can remove this option.

Auto Collision and Comprehensive

These coverages are another big portion of your total premium. Collision covers the cost of your vehicle if it’s totaled in a auto accident. It also covers your damages on your car, up to the value of your vehicle. Comprehensive coverage is exactly the same but for situations not involving accidents. Thefts and trees falling on your car falls under this category. Since my car is 7 years old with nearly 135k miles, I think I can lower my coverage or at least increase my deductible from $500 to $1000.

Towing and Rental

I’m not quite sure how I feel about paying $26.90 for towing and rental every 6 months. If I were to be involved in an accident that’s my fault, then I would need a rental, which could add up to quite a hefty amount, especially if it’s over a weekend. Also, towing is only $3, but for only $25 limit. It means I’ll recoup my money if I have my car towed less than once every 4 years. I think I’ll pass on the towing. But for rental, being without a car and paying rental out of your own pocket for multiple days can be significant.  Over the next 10 years at $23.90 for every 6 months, that adds up to $478 for rental coverage. At $30/day, I’ll break even after 16 days of rental. Although I haven’t had a need for a rental for the past 10 years, I think it might be worth keeping it.

Online Quote From Geico.com

I currently have insurance from Allstate and my monthly payment is $70.03. I went ahead and did a quick online quote from Geico.com just to compare. I entered every category the same so I can compare apples to apples. Geico gave me a quote of $68.92, for a savings of  about 1.5%. from Allstate. Hardly worth the effort of switching from Allstate.

And then I changed some of the parameters which I discussed above. The new quote  came out at $62.69 per month for a total savings of  about 9%. from the original quote. You can see the output of these results here: 1) Pre-Savings Geico Quote 2) Savings Geico Quote.

What Do You Think?

So, according to Geico, it appears that there are some money saving opportunity for me. Do you think it’s worth saving $6/mo for reduced coverage? The next thing I’m going to do is call my Allstate agent and see what kind of real savings they can provide. What about you? Are there any money saving opportunities from your current insurance coverage? Why don’t you try a free rate quote yourself at Geico.com and find out.

Update

You can read my followup post on how much I saved by changing a few items on my auto insurance policy, dubbed “I Saved over 20% In My Auto Insurance.”