Would You Share a Car With Friends? A New Ford Program Thinks So

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Many people opt to lease their car instead of buy it because of some of the conveniences that can come with this option.

And a new program from Ford could be taking this a step further with its car share program. Ford Credit Link, which is running its pilot program in Austin, Texas, makes it possible for a group of three to six people to share a lease and a car.

“People are already sharing books, homes and a number of things in between,” Margaret Mellott, a spokesperson for Ford Credit said in an email. “This Ford Credit experiment in Austin is asking if the trend toward sharing might apply to sharing the lease of a vehicle by a group of people who may not need a full vehicle lease to meet their mobility needs but who might like to have convenient access to a vehicle when they need or would like to use one.”

The lease is for 24-months, Mellott said.

To take part, “each person in the group must qualify for credit under our consistent credit criteria, and each person is liable for the full amount of the contract,” Mellott said.

The program uses an app that pairs with a vehicle plug-in device the dealership installs in the car. This makes it possible for users to monitor the car, reserve drive time and make car payments.

Even though this program was announced earlier this year, no one has currently signed up to take part. Mellott says their site is seeing a lot of traffic, but claims the lack of participation is because “people seem to be doing their homework as they consider how this might fit their lifestyles.”

Securing an Auto Loan

Doing your homework on a large investment, like an auto loan, is always a good idea. If you’re in the market for a new car, part of your research ahead of time should include checking your credit scores. Doing so will give you an idea of what terms and conditions you may qualify for when taking out a loan. You can do this by viewing two of your credit scores for free, updated each month, on Credit.com.

If your scores aren’t where you’d like them to be, you can work to improve them. You can get your free annual credit report at AnnualCreditReport.com and review the reports for any errors you may need to dispute. You can also take steps like paying down any credit card debt you may have and avoiding new credit inquiries while you work on rebuilding your credit.

[Offer: Denied from a loan? It may be because of a low credit score due to errors on your report. Lexington Law can help you navigate the credit repair process so you can get back on track. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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Car Leasing Is All the Rage. Is It a Good Deal?

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Old Betsy’s reign in the American driveway may be over. After all, why would you name a leased car?

Americans are no longer looking for a long-term relationship with their cars. Auto leasing is in the midst of a historic rise, setting all-time records quarter after quarter, and now makes up nearly one-third of the new car market, with millennial leasers leading the way. Consumers have begun to treat cars the way they treat cellphones — holding on to them until contracts run out, then happily exchanging them for the newest thing.

The records come just a few short years after leasing was all but left for dead during the Great Recession, when auto sellers shunned the practice, and leasing fell to only about 10% of the market. At the end of last year, auto leases made up 33.6% of all new car financing during the quarter — and 28.9% of all purchases — according to Experian Automotive.

A Nicer Car for Less

The appeal of leasing to consumers is obvious: The monthly payments are less. Experian offers these examples: An average new Toyota Rav4 loan last year cost $431 per month, while a lease cost $322; a Chevy Silverado costs even less per month, $544 vs. $384.

Many consumers use that savings to end up in nicer cars, and leasing can really expand consumers’ options. Here’s a calculation from Edmunds.com: Buyers with a $3,000 down payment and willing to pay only $300 per month can buy a $20,000 car, but they can lease a $35,000 car.

“People shop for vehicles largely based on monthly price, and right now, average dollar amounts for new-vehicle loans are soaring,” Melinda Zabritski, senior director of automotive credit for Experian Automotive, said. “In order to stay within their budget goals, we have seen that more consumers — even those within the prime and super-prime risk categories — are turning to leasing.”

Millennials are even more likely to opt for leasing, according to Edmonds. Leasing among younger adults is up 46% in the past five years, the firm says.

“Most millennials understand and accept that they’re on a tight budget and that they need to stick to it,” said Jessica Caldwell, director of industry analysis for Edmunds.com. “But it doesn’t mean that their financial constraints limit them only to the most basic vehicles to get from Point A to Point B. If they see a chance to get into a nicer car while staying within their budget, they’re likely to explore that opportunity. In most cases, leasing opens the door to the bells and whistles that they couldn’t otherwise afford.”

The Drawbacks of Leasing

Of course, leasing is hardly perfect, and has a well-earned reputation for causing consumer headaches. The biggest bugaboo is mileage limits: Many limit drivers to 12,000 miles annually, a serious disincentive for road trips. Also, while it’s easy to turn in a leased car and get into a new lease, it can be harrowing to drop off a leased car at the end of a term and face potential damage claims from the dealer or mileage overage payments. Many drivers find their insurance rates go up when they lease because of increases in mandatory coverage (check with your insurance company before you shop around).

And while leasing is attractive to people with long-term car commitment issues, a lease can be even more of an anchor than an owned car. Consumers who move and can’t take their car find out the hard way that getting out of a lease is even worse than getting out of a cellphone contract. Car leases can be transferred, but it’s easier to sell a car you own.

Still, leasing has become mainstream. Once more popular with luxury car drivers, leasing is now common for mid-level and discount brands. The Honda Civic was the most-leased car last year, followed by the Accord, Camry and Rav4, Experian says.

So, should you lease? One truth overrides all the details about leases: In the end, leasing costs more than buying. You pay for those lower payments by not owning anything at the end of the lease term. The best deal, financially, is buying the car. But the difference can be only a few thousand dollars, and that may not matter to you.

On the other hand, if you are leasing mainly because it feels cheaper than buying, you are almost certainly making a mistake. Long-term, buying is the cheaper option, especially if you don’t mind holding onto your car for more than a few years.

Luxury cars that lose value quickly (and often aren’t needed as “everyday” cars) still make the most sense to lease. People who live very close to work (or work at home) and don’t pile up telecommuting miles are good lease candidates. And if you really do want a new car every three years, and don’t mind knowing that you haven’t gotten the absolute best deal you can, consider leasing. But know that there is always a risk when you turn the car in at lease’s end that a dealer in a bad mood may try to nickel-and-dime you for every carpet stain. If you tread very lightly on your floor mats, you’ll probably be fine. But if you drive hard, a surprise end-of-lease wear-and-tear bill could make those lower monthly payments seem pretty expensive.

Remember, your credit score can directly impact your ability to get the best deal on a car lease. You can check your scores, along with the major factors impacting them, with your free credit report summary each month on Credit.com.

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