Financial Planning

The Fed Just Raised Interest Rates, effects on housing, autos

Much as economic analysts had expected, the Federal Reserve announced at the close of its two-day meeting on Wednesday that it was raising the target federal funds rate by a quarter of a percentage point to between 0.5% and 0.75%, marking the first time the Fed has raised rates since December 2015 and only the second time in a decade. The Fed also indicated it expects to make more rate hikes in 2017.

How are your personal finances affected by the Fed monetary policies?

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Leasing vs Buying

The decision to buy a car, or lease it, is complicated by a number of factors, beyond the amounts of monthly payments, or the cost of the car. There are the financial factors, and the personal tastes or preferences to consider.

The BUY v. LEASE Calculator will help you to compare apple-to-apple the costs of buy v. lease. Just plug in the numbers. Keep in mind, the higher the monthly payments, the more costly is the lease.

Lease vs Buy Calculator

Typically, the interest rate assumed in a lease is usually lower than the rate charged by the lending bank in a car loan. The interest rate for a used car loan is also often higher than the lease rate or for a new car loan.

Dealer fees are extra fees the dealer wants to charge you, and justifies them with such names as document fees. These fees are typically different in a lease v. buy.

In some states, the sales tax rate for luxury cars, which cost higher than a certain amount ($50,000 in Connecticut), are higher than those costing less.

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Personal preferences can be important considerations

Besides the financial factors, personal preferences can play important roles in buy v. lease. You may prefer to lease because you like to have a new car after a few years; plan to move a long distance away; want to have a more expensive car (thanks to lower monthly payments in a lease).

However, “Buy” might be more suitable, if you drive more than 12,000 – 15,000 miles a year, the car has (expected) high resale value and “drives like new” even after several years (like Mercedes Benz or BMW). Or simply you do not want to go through this “look-for-a-new-car-haggle-with-a salesman” process again every few years!