You do not have ownership of a vehicle. You do not have any payment-free years if leasing occurs repeatedly. It is difficult to end the lease early without significant penalties. This may limit flexibility in some cases. There are extra fees for extra miles (generally miles in excess of 12,000 to 15,000 miles per year have excess mileage charges). There are extra costs if the car if returned in less than good condition. Some cars that lose their value quickly have a high monthly lease payment to pay for the fast depreciation. The best cars to lease are those whose 24-month residuals are at least 50% of their original manufacturer's suggested retail price (MSRP) value. The higher the residual, the lower the lease payments. If you decide to lease, remember the following: The lease interest rate should be comparable or lower than the rate to borrow. Some of the quoted rates in ads do not apply if your credit rating is not perfect.
Choose a lease term that is no longer than the general coverage warranty that comes with your vehicle. Question 5: When should I start saving for retirement? Answer 5: Retirement is something that most people think about. Some people plan ahead, but others do not. You should start planning for retirement as early as possible. This does not mean you should start in high school. It might mean that you should start thinking about a plan in college or shortly thereafter. When people plan early, they have greater uncertainty about future income and future retirement needs. However, even if people plan some and save some early, they might be able to minimize deficiencies later. It is never too early to begin saving for retirement, regardless of which savings vehicle you use. It is tempting to avoid saving for retirement, especially for people under 30. They reason that they will have 30 or 40 years to build a retirement nest egg. But one of the most powerful reasons to start saving early is that the earnings on your retirement funds will begin compounding sooner. For example, Karen 28, deposits $2,000 to a tax-deferred retirement plan for 7 consecutive years and then at age 35 makes no additional contributions to the plan. Her friend Stan thinks saving for retirement at age 28 is ridiculous and waits until he is 35 before making retirement plan contributions. He then makes $2,000 annual contributions for the next 30 years. Karen has made total contributions of $14,000, and Stan has contributed $60,000. If both earn an average of 10% on their investments, which one of them has the greater retirement fund? Through the magic of compounding, Karen's balance has grown to $331,000; Stan's is $329,000. By starting to save early, you will ultimately need to save less to have the retirement lifestyle you want. Question 6: Which is better for me: the company's 401(k) plan or an IRA? Answer 6: First, it is important to understand each investment vehicle.
- Spring '13
- Payment, used car, Individual Retirement Account