Photo: EveryCarListed P on Flickr

A new car is one of the most exciting and highly anticipated purchases. As a large, long term investment, it can also be one of the most stressful. Since there's really no ceiling marking how high car prices can go, the buyer's budget is usually the primary limiting factor, before extra options or aesthetics. Once you have your budget, there are two main questions to ask; new or used? And, perhaps the more impactful of the two, buy or lease? These questions go hand-in-hand and all four combinations (yes, it is possible to lease a used car) are important to explore because your choice could swing the overall price significantly. Below we'll help you compare the long term effects of each.


Leasing: the shiny option

Most commonly, someone who wants to lease a car will lease a new car—that is, after all, the point of leasing for most people. While it is possible to lease a used car, it's uncommon and not offered by every dealership. Leasing is the shiny option because you drive away with a brand new car by, basically, renting it for two or three years. You pay the costs of using the vehicle for the term of the lease instead of paying for the whole vehicle. This often results in lower monthly payments than those of someone buying a new vehicle through financing.

There will likely be a down payment and fees due up front, followed by a schedule of monthly payments. The lease might also end with additional fees. It's important to understand the terms of the lease, including any mileage limits and wear and tear fees.

Your lease deal is based on the difference between the transaction price (cost to buy) of the car and its residual value (what it will be worth when the lease is up). The dealer will divide the difference into your monthly payments. The other major factor influencing the lease is your credit score. Leases sometimes call for large down payments, and this will only increase with poor credit.

Buying: costly but financially smart

You want that new car but you can't afford to buy it, so leasing seems like the perfect option. But as in most life decisions, the financially smart option requires some sacrifice. In this case, being smart with your money probably means buying, rather than leasing. And that probably means buying a lower-cost new car, or a used car.

Some quick math, courtesy of average prices from Edmunds, shows that buying used is usually the best option in the long term.

If you lease an SUV that costs $27,142 (according to the Edmunds average), after fees and interest your monthly payment will be about $330 over 3 years. Out of pocket, then, leasing a new SUV for a total of six years will cost $27,836, or almost $3,000 more than buying a used SUV. However, leasing would be cheaper than buying the same new SUV (with financing plus down payment).

The problem is that, even though you saved on monthly payments by leasing rather than buying the new car, you don't own anything after the lease ends. So after six years and two leases, you've spent $27,836 on a vehicle that you still don't own. On the other hand, a purchased car can be traded in after those six years. After its trade-in value is subtracted, the same new SUV would cost only $23,882 to buy. In the long run, buying is the better choice.

That's a large savings, and it comes without the limits put on lessees by the contract they'd have entered into with the dealership. Yet, it's still not the most frugal option. New cars face immense depreciation and, despite warranties and promises by the dealership, will probably require several part replacements or repairs in six years. Buying used remains the wisest choice, though it might not be the advice you want to hear. In this example, buying a similar SUV used and trading it in after the same six years would cost almost $9,000 less than leasing the new one.

The truth is: buying used is hardly a loss. Certified preowned vehicles are often in outstanding shape and most vehicles don't change significantly in three or four years, anyway.

Although monthly payments on a lease might be lower than those for financing a new car, buying the new car is the better value in the long run. And, of course, buying a used car is your best option overall.


Tom Twardzik is a writer covering personal finance, productivity and investing for Paypath. He also contributes pop culture reviews for Popdust and travel writing for The Journiest. Read more on his website and follow him on Twitter.

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Developing further skills can boost your career at any stage.

Whether you are looking for a new job or trying to grow in your current one, getting a certification can be a great way to improve your skills.

Anyone can put that they are proficient in a computer program on their resume but having a certificate can help you stand out amongst the competition and give credence to the strength of your skills.

But what's the best way to invest in yourself without breaking the bank? Some certification programs can cost hundreds if not thousands of dollars. We are going to walk through six of the best certifications you can get for $100 or less.

Tableau

Tableau's data visualization capabilities are comparable to Domo and Power BI.

Who is it best for: Those who work with analyzing and presenting data.

Cost: $100 for Tableau Desktop Specialist; additional certifications are available for a larger fee.

More companies than ever see themselves as data companies. Being able to understand data and use it to guide decisions at your company is often critical to taking on a leadership role. Not to mention, being able to present the data in a clean, attractive, and compelling way can help get buy-in from others in your organization or clients. That's why Tableau is a great tool to have in your toolbox.

Tableau allows you to create interactive visual analytics dashboards. In layman's terms, you can take data; create graphs, maps, or charts; and then allow end-users to interact with these graphics to better understand the information. It's a fantastic tool allowing non-technical users to gain insights for data-driven decision-making.

Tableau Desktop Specialist certification starts at $100 and has no expiration date. There are many videos on Tableau's site to prepare for your exam as well as Tableau Starter Kits allowing you to play around and learn the different capabilities of the program. Tableau offers a 14-day free trial as well as free license for one year for students.

Additional certifications after Desktop Specialist are Desktop Associate and Desktop Professional. Those working with a Tableau server may also be interested in a separate certification as a Server Associate or Server Professional.

The Federal Reserve sets the guardrails for the federal funds rate, and through that helps control the money supply for the nation.

When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.

A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.

One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.

The Federal Reserve The Federal Reserve


The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.

This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.

The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.

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Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.

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