Should You Buy or Lease a Car?
Due to the increasing trend of leasing the question of buying or leasing a car has become very common. If you also want to find an answer to this question you are at the right place. There is no clear answer we could give you about leasing or buying a car because everyone has different priorities. It also depends on the financial situation and the needs of a person.
By looking at how leasing and buying work and what are their advantages and disadvantages you can easily decide which option is more feasible for you. You can also check out our quiz (at the end of the article) through which we will tell you which option suits you more.
Buying a Car
Higher costs are usually involved in buying but in the end, you are the only of a car. It doesn’t matter whether you make a payment upfront or in installments, you will be the owner at the end. You can find more about it on our buying a used car guide.
Leasing a Car
Leasing means that you are renting a vehicle from a dealer for a limited amount of time. This period is usually from 36 to 46 months. After that, you can either return the vehicle to the dealer or buy it by paying some amount only if it was decided in the lease contract. The monthly payment of leasing is usually lower than the monthly loan payment for a new vehicle. The factors on which lease payments depends are:
Time
The number of months you agreed to lease a car will determine the lease payment you make every month. If you keep the car for a longer time you have to pay more for that car. It’s because of the depreciation that occurs when you use the car.
Mileage
Whenever you lease a car there is a certain number of miles you will be given under which you can drive your car per year. You can choose from different mileage options. The monthly lease payment will increase with the number of miles. On most leases, you were allotted 12,000 miles per year. In case of exceeding the mileage limit that was decided in the contract, you have to pay more money to a dealer at the end of the lease contract.
Residual Value
The residual value is calculated by figuring out the depreciation of the vehicle. If you have a plan to buy a vehicle after the end of a lease period, this is the amount you have to pay.
Sale Price
It’s a price a dealer can get if he sells the car at that time. As it's the worth of the car you are leasing it affects lease payments a lot. Lease payments will increase if the vehicle is expensive.
Rent Charge
This is an amount that is usually shown as a dollar sign instead of a percentage, but it’s always equivalent to the interest charge.
Fees and Tax
These are added to the monthly costs.
Advantages of Leasing & Should You Buy or Lease a Car
Let's have a look at more details.
Brand New Car
It’s a dream of almost every person to have a brand new car. By leasing a car you have an opportunity of driving expensive and well-equipped vehicles which you might be unable to afford otherwise. When the lease period is over you can return the car and bring home the new one.
Free Oil Changes and Maintenance
Oil changes and scheduled maintenance are also included in some of the lease plans. At least three years of warranty is offered by most of the cars. So most of your expenses will be covered.
Lower Monthly Costs
You don’t have to worry about monthly costs if you are leasing a car. In leasing, monthly payments are usually very low as compared to the payments for a car loan. Due to this reason, people going for the leasing options usually have luxurious cars.
No Resale Worries
If you are also one of those people who hates the idea of selling their used car to a dealer or a private buyer then the leasing option is for you. In leasing, you don’t have to go through the hardship of finding a good buyer for your car. You just have to return the car at the end of the leasing period.
Trouble-Free Years
You get a car in its trouble-free years.
Tax Advantages
If you are a business owner you may have some significant advantages concerning taxes.
Safety Features
Your car will be the one with the latest safety features.
Disadvantages of Leasing
We know how attractive leasing seems but there are some disadvantages that you should take into account before making any decision.
- Leasing will cost you more in the end as compared to the loan, it’s because of the depreciation that occurs during the time you are paying for that car.
- A lease contract restricts you to drive a specific number of miles, if you exceed that limit you have to pay the penalty. The mileage penalty range from 10 cents to 50 cents per extra mile. On the other hand, you don’t get any credit for saving the miles.
- If you are unable to maintain the vehicle in good condition at the time of returning, you have to pay extra wear-and-tear charges. So if you usually use your cars roughly you should let go of the idea of leas.
- During the leasing period if you decide that you don’t like the car it will be very difficult to let go of the car. You have to pay high terminations fees and penalties.
We hope that this article has increased your knowledge and will help you to make your decision. Don't forget to take our quiz through which you can determine which option is more feasible for you.
