Leasing is justifiably a popular option for new car shoppers. There’s less of a financial commitment, there can be more flexibility and there are a lot of manufacturer incentives in place right now as well.
However, the advantages of buying remain as well. The most important of which is you have a car you can call your own once all of the monthly payments are made. These factors can make deciding between leasing vs. buying a car tough.
Why Lease Now?
Right off the top, you have less of a financial commitment with a lease. You can get into a lease for less money than it takes to buy a car. You’ll only pay for the anticipated depreciation of the car during your time with it. As a result, your monthly payments are lower too.
What’s more, because leases tend to only be for a few years, the car will be under warranty while you have it. This means the cost of repairing any malfunctions will be borne by the manufacturer.
Leasing also provides a hedge against unexpected depreciation. If modern times have taught us anything it’s that life can change suddenly. Yesterday’s realities can become today’s fond memories in the blink of an eye.
Why Buy Now?
Again, the biggest advantage here is you own the car. When all is said and done, you can drive free and clear with only maintenance and registration fees about which to be concerned. You’ll have no more monthly payments to make, once the loan is satisfied.
Meanwhile, leasing can put you on a treadmill upon which you’ll make car payments forever. Moreover, when it comes to leasing vs. buying, the car you buy outright will still have cash value you can extract whenever you’d like
Leasing Downsides
You’ll pay more to insure that leased car because the finance company wants to be sure its property is adequately protected in the event of a catastrophe. In its ongoing effort to retain as much of the car’s residual value as possible, you’ll be required to limit the number of miles you drive to preserve the value of the car. In most cases this is either 12,000 or 15,000 miles annually for mainstream cars and 10,000 miles for luxury cars and high-end sports models.
You’ll also agree to maintain it to a high standard, or pay for any excessive wear and tear. If you need to end the ease early, you could be required to pay the entire amount of money you agreed to pay (the total of all of your prescribed monthly payments). Should you decide to customize the car in any way, you’ll have to remove those modifications and pay to correct anything resulting damage.
Buying Downsides
You’ll need a down payment of twenty percent of the purchase price or so to get affordable monthly payments. This is cash you’ll tie up for at least five years or more. This money might serve you better were it invested.
Further, while it’s true the car is yours once all the payments are made, the warranty will have long since expired. This means the cost of repairs will be on you, as will the full burden of depreciation. So while it’s true the car will be yours, most of its value will have been consumed over the term of the loan.
These are the primary factors to consider when deciding between leasing vs. buying a car. Of course, the full advantages of the benefits and the severity of the detriments of each choice will vary according to your particular situation. It’s important to also factor in your lifestyle and your budget.
