Leasing vs. buying… which is better?
Hello again loyal Beaverton readers!
Once again, I have been asked to write about the difference between leasing or buying a new car. Is one a better option than the other?
It’s important to understand that the decision to lease or buy a car has financial implications that should be considered before pulling the trigger on a deal.
Your personal taste and lifestyle should also play a big role in whether you decide to lease or buy.
In this article, I’ll give you the major pros and cons for each side of the lease vs. buy debate and tell you what you need to know about how to lease cars, so you’ll be able to decide which option is right for you.
What are your goals, budget and preferences?
Whether you choose to buy or lease your next car depends mostly on your goals, budget, and personal preferences.
Both buying and leasing cars have their benefits; the key is determining which of those benefits matter the most to you.
Before you begin your search for your next car, you should take time to decide what you want to get out of it, what terms you’re comfortable with, and the financial implications, letting those factors drive your decision.
Below are some of the best benefits of leasing a car, followed by some of the best reasons for buying a car. Take a look and decide for yourself which option appeals the most to you.
Here are 6 advantages of leasing a car:
- Lower monthly payments. The cost to lease a car is typically much lower than to buy one. Little or no down payment is required, and you don’t have to pay any upfront sales tax. However, when you return a leased vehicle, you may have extra charges for racking up mileage that exceeds the allowable limit, terminating a lease early, or having any unrepaired damage.
- Never being “upside-down.” When you lease a car, you rent it for a fixed term which is typically 2 or 3 years. The amount you pay each month is tied to the amount of depreciation that’s expected during the lease term (note that different makes and models of vehicles depreciate at different rates). You only pay for the depreciation of the car that occurs during your lease term and you can never be “upside-down,” which is a common situation where vehicle owners owe more than their car is worth.
- Fewer repair expenses. If you’re covered by a manufacturer warranty during your lease term, you never have to worry about getting hit with a large, unexpected repair bill. However, you are still responsible for regular upkeep, maintenance, and the minimum amount of auto insurance required by the state where you live.
- Driving a new car more often. If you lease a new vehicle every few years, you will always have the benefit of driving a car with the most up-to-date technology, comfort, and safety features.
- Never having to sell a vehicle. Once a “closed-end” lease term expires you can simply return the vehicle or choose to initiate a new lease for a different vehicle. But you never have to go through the hassle of selling a vehicle yourself or being concerned about getting a fair trade-in value. Or you may have the option to buy a vehicle at the end of the lease term for a pre-set price. That could be a good idea if the vehicle is worth more than the agreed upon purchase price—or a bad idea if it is worth less money.
- No loan approval required. If you have less than stellar credit, you may not be approved for a car loan–or you’ll have to pay an outrageous amount of interest. Leasing companies typically aren’t as strict because they can easily take back the vehicle if you don’t make payments or if you violate any lease term.
Here are 5 advantages of buying a car:
- Paying less over the long term. Monthly lease payments are generally less expensive than monthly car loan payments. However, with each loan payment, you build up equity for the future when you decide to sell or trade your car in. Buying a vehicle and driving it for several years after you pay it off can be the cheapest way to own a car. The longer you drive it, the less it costs.
- Have the option to sell it. As a car owner, you have the flexibility to trade it or sell it (and pay off any existing loan balance) at any time. You’re never locked into a fixed ownership period like with a car lease.
- No mileage limit. When you need to drive a vehicle as many miles as you want, it’s much better to own it. Leases put caps on the number of miles you can drive and charge a hefty fee when you exceed the limit.
- No restrictions on appearance. If you want to use a car or truck without having to keep it in perfect condition or want to accessorize it, you should always buy it.
- Discount the depreciation. Depending on the vehicle, 20% to 40% of its depreciation can occur within the first few years. So, when you buy a 2- to 3-year-old-vehicle, you get the advantage of paying a price that reflects a substantial depreciation discount.
I really hope this article helps you understand what many find a confusing topic. If you still have questions however, no problem. Just call or email and I’ll do my best to help.
Thank You all for reading and calling in.
If we can help with the purchase or with the sale of a vehicle please keep us in mind. I guarantee you will not get a better deal than we can help you get. We can be reached by telephone (503) 930-1493 or at firstname.lastname@example.org. By Larry “The Car Guy“ Ferguson