Posted on: Thursday, June 10, 2004
THE COLOR OF MONEY
Potential car buyers seek advice on leasing, middle-age desires, finance options
By Michelle Singletary
There are a lot of folks who are unsure what to do when it comes to purchasing a car, whether new or used. So let me answer a few of the questions left over from my most recent Web chat on car shopping (an archive can be found at www.washingtonpost.com):
Q. I am helping my grandmother look for a car. She is on a fixed income. She is looking for something around $15,000. Any suggestions? Would she be a good candidate to lease?
A. First, there are many free resources you can use to help find a car. Try going to www.edmunds.com or www.cars.com. At both sites you will find a lot of information on cars in your grandmother's price range, both new and used. You can even search for cars being sold near you by typing in your ZIP code.
Don't let grandma lease a car. After the lease, then what? You have to either purchase the car on which you have paid thousands of dollars, lease again or buy another car.
Q. I've never leased a car in my life, always bought new with short-term loans or cash, and kept (the cars) a long time. However, I'm getting middle-age convertible lust. I want to buy a Saab convertible. I'm not sure that I would want to own this car forever, but it sure would be fun for a while. Would a lease make sense in that situation? Does leasing ever make sense economically?
A. Leasing may (and I do mean may) make sense economically if you get a tax break (and even then I'm not convinced it's smart).
According to the IRS, if you use a car for business, you are entitled to a tax deduction either for the standard mileage rate or the actual expenses for business use, such as gas, repairs, tires, insurance, registration fees, licenses and lease payments. As there is no deduction for middle-age angst, buy the Saab if you can afford it and sell it when you no longer want it.
Q. When I bought my last new car, I used a (car-buying) service. For $300, they were able to secure for me the exact model, color, etc., of the car I wanted with $2,000 to $3,000 off the sticker price. I know I could have done the legwork myself, but I felt I easily received my money's worth. Isn't this really the best way to go car shopping?
A. I wouldn't say it's the "best" way, but just another way to ensure you get a good deal on a car. I think such services are worth the money for people who just don't want the hassle of negotiating for a car.
Q. When I see an ad in the paper for a car that seems fair, I go to the dealership and they say it was only for the one car whose stock number was listed in the ad. How can I get a dealer to start dealing with me on a similarly equipped car at that same low price?
A. You have to be prepared to negotiate. Be sure to research pricing, incentives and financing on the car you want before you go to the dealership. If you can't get the deal you want, walk.
Q. Is it illegal to deduct home equity loan interest in taxes if that money is not used for home improvement but for buying a car?
A. I always caution people about putting their home in jeopardy to buy a car. However, the fact is that as long as the loan is secured by the residence and you are not over the home equity limit (a maximum of $100,000, or $50,000 if married filing separately), you can deduct that interest no matter what the proceeds were used for, said an IRS spokesman.
