What’s Better? Leasing a Car or Buying One?
Strictly speaking, purchasing a car is one of the more expensive transactions the majority of drivers will go through. For the financial reasons alone, it’s always a smart idea to not only do plenty of research before you make that transaction but to take the time to decide which method of payment is the best for you. When it comes to new cars, a lot of people have trouble deciding between buying and leasing. Trying to figure out the benefits and drawbacks for each of these options can be taxing, to say the least.
When it comes to either buying or leasing a car, the option you choose really depends on your current financial circumstances and the way you tend to spend your income. One question you can ask yourself before making a decision could be, what exactly will you be using the car for? Is it just something with four wheels to get back and forth from work and the grocery store? In this case, buying a cheap and economical vehicle might be right for you. However, maybe you’re a businessperson who often needs to impress new clients. Here, leasing a more expensive model might be better. This way, you can pay off the car in installments, rather than all at once and trade it in, for an even newer model, after a few years.
Either way, when you’re trying to decide between leasing or buying a car, the money itself isn’t the only thing that needs to be considered. Below, we’ve laid out the advantages and disadvantages of both options to help you make the best choice for your needs.
Leasing a Car: The Advantages
The Potential for Lower Monthly Payments
If you’re interested in lower monthly payments then you might want to consider leasing, especially if you’re in the market for a brand new top of the line vehicle. Generally speaking, if you want to buy a new car or even one that’s a few years old, you’ll need to take out a loan to buy for it. This is what the majority of consumers need to do and there’s nothing wrong with it as long as you can financially handle it. But if driving a new car is something you’re really interested in and you want to save some money on a monthly basis, leasing could be your best option.
Having a New Car Forever
Leasing can be the more appealing choice for drivers who like to switch it up on a regular basis. As long as you take care of the car, leasing will see that you’re always driving the latest model that has all the best gadgets and new features. On top of this, changing your car every three years will make sure that you’ll have to get as few repairs on the vehicle as possible. In other words, you’ll end up getting more driving time behind the wheel of a new car for less than what you’ll normally pay to buy that car.
Leasing a Car: The Disadvantages
Higher Cost of Insurance
One of the downsides to driving a new vehicle all the time? You’ll be paying high costs for insurance. While leasing a car will mean that you’ll save on the cost of maintenance, you might just end up paying that same amount, if not more in insurance rates. So, in the end, if you’re leasing a string of cars over a number of years, you might end up paying the same amount, if not more than you would to just buy a brand new car.
You Need Good Credit In Order To Lease
Leasing a car may not even be an option if you don’t have favorable credit. Most lease providers will only approve you for a lease if you have a good credit score and can prove that you’re financially stable enough to handle the monthly payments.
Buying a Car: The Advantages
The Method of Payment Is Simple
The process of taking out a loan to purchase a car is generally an easier one than leasing, simply because you’ll know right off the bat how much the car will cost in total. This will make it easier for you to create a long-term budget.
A Purchased Car Provides You With Some Equity
Depending on how much a car is worth and your financial standing (i.e. your level of debt, etc.), once you’re the owner of that car, whether in part or in full, it can be worth a certain amount of equity. This means, if you’re in debt and need some extra money to pay it off, you can sell the car, which you can’t do with a lease. However, if you just want to take advantage of the car’s value, similar to a lease, you can always trade the car back in at the dealership and use it to finance the down payment on a more recent model.
Buying a Car: The Disadvantages
Additional Costs For Maintenance and Mechanical Issues
New cars will usually come with a warranty which will, of course, expire after a certain amount of years. Up until the expiration date, any mechanical problems with the car, assuming you weren’t the cause of those problems, can be fixed at the dealer’s garage, usually free of cost. After the warranty expires you’ll be in charge of covering the cost of any problems that might occur. So, before you buy a car, you always need to consider the fact that it will have more and more problems as it ages. Also, if you ever need to sell the car, you’re the owner, so you’ll have to deal with the process of trading it in, or finding another private owner to buy it.
An Immediate Drop In Value
One of the most important things to remember when you’re purchasing a new car is that it starts to lose value as soon as it leaves the lot and it will only continue to lose value. In addition, there are many other issues that will cause the car’s value to decrease, such as inevitable usage and aging, as well as any accidents that might happen. Not only this, but new models of that same car come out with every passing year and with every new model, the vehicle’s resale value will suffer.
Take a look at this infographic to help you decide which method of financing is right for you.
Take Your Time, Consider All The Factors
In the end, it’s up to you and your current financial circumstances to help you decide whether buying or leasing a car is the best option. Leasing might be more beneficial if you’re the type of person that doesn’t like to commit yourself to one car for a long period of time but instead like to switch it up every couple of years. But, maybe it’s better for you to just buy the car through financing, that is if you’d rather the simplicity of paying off everything in a matter of years and then just dealing with the general wear and tear from that point on. Either way, make sure you take the time and do the proper research for making a decision that will drastically affect your finances.