Money Rehab with Nicole Lapin - Driving a Bargain: Besting the Car Market

Episode Date: January 24, 2023

To buy or to lease a car, that is the question Nicole answers in today's episode. Plus, WTF Elon? Nicole explains why Elon Musk slashed Tesla prices.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. I've got some good news. And it could be a game changer. But I'm almost scared to say it out loud.

So I'm just going to whisper it for now. The car market is getting better. No, seriously. The car market is getting better. It is true. No, seriously, the car market is getting better. It is true. After one of the worst car markets ever, things are finally, finally cooling off. So if you have a car that runs, but you've been eyeing a new car, I'd say hold on just a little bit longer. Things are looking up.

But what if you don't have a car that runs? Well, the car market isn't completely favorable to the consumer just yet. It is still tough. And I know this firsthand. I was in a car accident last year, and for the first time ever, I considered, I don't know, leasing a car. I ended up not, but I considered it, which is breaking news for me. If you've heard any of my other episodes about cars, you know that leasing is something I normally do not recommend. But these are not normal times. So if you're hard up in need of a ride like I was last year, let's talk about what your

options are and how they're changing. Let's start with leasing because traditionally I have been very outspoken against it. There are a ton of reasons why leasing sucks. You have no equity in the car because you don't own it, even though you're paying for it. Plus, there are fees galore, the most absurd being the early termination fee. If you buy a car and change your mind, or you need to change your situation because, you know, life, in six months you can just

sell it or trade it in. But with a leased car, you'll be charged a hefty fee if you end your lease early. And it can also be limiting. Most leases cap how far you can drive per year and charge for overages. This is the downside that irks me the most. You lease a car and then are incentivized to use it less? Someone tell me how this makes any sense. But historically, leasing has been a great way to get a nice new car for much lower monthly payments than taking out a loan to buy one. And before you slip into the DMs, yes, I know there are some benefits to leasing if you own a business. But over the last few years,

I will say the deals on leasing have dwindled. Recently, many consumers have been paying over the MSRP or manufacturer's suggested retail price. While this was always common on higher-end cars, it became the norm across the market. This really raised the cost of leasing a car because the value of the car determined the cost of the lease. Okay, enough conceptual stuff. Let's get into the numbers, shall we? You guys know the new Broncos, right? At first, I honestly wasn't sure about that. But then I saw the two-door model and I got the hype. So I ran the numbers. Now, I couldn't get the leasing numbers for the two-door 2023 Heritage Limited Edition Bronco in Robin's Egg Blue with a white top, which is the car I know you wanted to hear about, obviously. I couldn't even pull those numbers because the make and

model is so hard to find right now. So instead, we're going to look at the four-door Heritage Sport 2023 in Hot Pepper Red with a white top, which is still cute. The car has an MSRP of $36,035. With $2,000 down and an APR of 7.9% with 72-month financing, this car will have a monthly payment of $658. If you want to lease this exact same car with a down payment of $2,500 for 36 months, then your monthly fee will be $615. I mean, you're not even saving $50 a month here. You get all of the aggravation of a lease, like a 12,000 mile a year limit without any of the cost savings that could have typically come from leasing a car. And believe it or not, this pricing isn't as bad as it could be. Some dealers are actually charging more for leases than they are to finance a car and buy it outright. Now, if you happen to lease a car before

prices went crazy, then you are indeed in luck because a lease locks in the pricing for the car. Cut to the present, some dealers are so desperate for cars that they're buying out leases early. So if that was you, good on you. You lucked out there. But now we're seeing some industry-wide shakeups because prices are falling. Prices on used cars are finally dropping after rocketing up 45% in 2021. Used car prices rose because there weren't enough new cars to go around because of manufacturing issues. So many people who had planned to buy a new car were forced to buy a used one. But now there's more inventory. And as a result, those used car prices are falling. And in particular, Tesla prices are falling.

And price drop has nothing to do with supply and demand here. Elon Musk just decided to slash pricing. Musk cut prices on the Model S, 3, X, and Y. And yes, that does spell sexy or close enough anyway, for Tesla, cutting prices is part of their strategy to stay competitive in a more crowded EV market. The price drop on new Teslas is significant, like we are talking 20% savings. Not only that, the reduced prices mean that some of the higher-end Teslas are now eligible for a number of different tax credits that can save the buyer an additional 10%. And these discounts have seriously decreased the price of used Teslas as well, to the tune of almost 60% in some cases. The Tesla resale market has taken note of these deep discounts, and one Twitter account has actually

been tracking the number of Teslas sold on CarMax since the price drop. If you've been wondering, 57% of all Teslas listed on CarMax were sold in 24 hours. So suddenly, after three years of a highly competitive car market, there are deals to be had, and not just on Teslas. Economical cars are finally being sold at or even under the MSRP. Some of these deals are great, but be careful to read the fine print, as always, because many of them look way better than they actually are. A popular offer right now is a rebate if you do your financing through the dealership. But when you look closer, you may find that the dealership's loan has a far higher APR than your bank does and that the difference is so large that by the time

you've paid off the dealership, you've spent your rebate money on the interest on the dealer's loan. So if you're out there buying a car new or used, it is very important that you look around for the best possible rate on whatever kind of financing you choose. So net net, if you can wait just a little bit, do. If you can't wait to buy a car, check out the used car options first.

In most cases, you'll find that cuckoo bananas high prices of used cars are deflating faster than new cars and leases. For today's tip, you can take straight to the bank. Car loans are lasting a longer and longer time, with one in five lasting seven years. These loans can look very appealing to the buyer because they come with much lower monthly payments. But please do the math. When you take out a loan that lasts that long, you end up paying way more in interest than you would with a loan with a shorter term. So crunch the numbers and make sure you know how much those lower payments are really costing you. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin.

Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehabatmoneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make. Thank you.