To Lease Or Buy a Car; That is The Question.
More and more people are in the same boat as far as leasing vs buying a car.
“Should I lease or buy a car?” You’re officially at a crossroads. I’d like to think of myself as your co-pilot in this scenario.
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You must know this upfront; money will be spent. A car is an investment, and as such, you’re going to be emptying your wallet. Luckily, there are avenues you can take that can ease the financial burden.
So, “Is it better to lease or buy a car?” Thus begins the tug-of-war that is buying versus leasing a car. Which side wins in this battle? The answers may surprise you.
Know the difference: leasing vs buying a car pros and cons.
There are many factors. Let’s start with buying. It’s the traditional route to take when you are looking for a new or used vehicle. When it comes to buying, the advantages are obvious:
- Ownership: It’s officially in your name. If you finance, though you’ll have to make monthly payments to your lender, you’ll build up equity with each successive monthly payment as long as each payment stays ahead of the rate that the car depreciates.
- No mileage restrictions: Since it’s your car, you can drive as much as you want without having to worry about racking up miles. If your work commute is long or you just love to drive, buying makes much more financial sense.
- Money towards your next car: The equity you build up can be used to purchase a new vehicle. Once your car is paid off and retains a decent value, trade it in and use the value towards a new ride.
The disadvantages of buying a car instead of leasing:
- The short-term costliness is significant. You’re paying for the entire car when you buy one, so your finances are going to take a bigger hit. I’d recommend a substantial down payment to ease the strain on your wallet.
- Loan interest can rack up. You have to pay interest on any car loan you receive whereas with leasing you only pay interest on the difference between the capitalized cost and vehicle’s residual value. In the long run, leasing will have you paying much less in interest.
- You’ll need a big down payment. If you want the best finance terms, a down payment is necessary. It creates some breathing room for your monthly payment amount and reduces the riskiness in the loan. A substantial down payment is the best way to go.
The advantages of leasing a car instead of buying:
If you’re looking into leasing, you’ll find that there are significant differences.
- Lower monthly payments. Saving money is always nice. Your monthly payments are lower because you’re paying for the depreciation occurring during the term of your lease. When you choose to lease, you could afford a nicer car for the same monthly payments should you choose to buy.
- Excellent warranty coverage. Every bit of mileage will be covered by the manufacturer’s warranty. As long as you’re not overdoing it on driving, you’ll be safe. You’ll also enjoy maintenance perks. Expensive repairs are a thing of the past as the dealership’s service department takes care of any problems that arise.
- Easy trade-in process. When your lease term is up, you can choose to trade in the current vehicle for another. There won’t be any haggling over the car’s trade-in value, you simply swap out for a new vehicle.
There are disadvantages to leasing a car, too:
- You don’t own the car. Think of it like paying rent instead of a mortgage. The car is owned by the leasing company, so be sure to stick to the contract obligations you agreed to.
- Mileage limits. This is no joke; there are strict mileage limits and if you exceed them, it’s expensive. It’s important to estimate the number of miles you drive per year so you don’t end up way under or over the mileage restriction.
- You need excellent credit. Sure, you can have bad credit, but it’s going to be very expensive. If you want a nice car, excellent credit is expected. Take my advice; check your credit score first.
It’s time to make a decision: lease or buy a car?
Now that you know the differences between leasing and buying a car, you’ve got some work to do. Ask yourself which choice makes the best financial sense, what will work with your commute, will you want any custom add-ons, do you want to stay in a fixed mileage rate? These are just a few of the questions you should consider. In the end, whether you buy or lease, just make sure it’s within your financial means and doesn’t put you in a tough situation. Happy driving!
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