Purchasing or leasing a car is one of the most exciting steps in life, but it can also be incredibly stressful and overwhelming. For many, the pure excitement of getting a car of their own, or the car of their dreams, can override the complications that come with borrowing and financing. Besides all of that, the decision to buy or lease a car is one that takes a lot of consideration. Determining which path is the correct one can be difficult.
Leasing a car can be a complicated matter, especially for those that have never done it before. There are even a few misconceptions when it comes to leasing as a lot of people think it is only for people that cannot afford car payments or for those that own their own business.
If you are having trouble making a final decision, then read along as we discuss the pros and cons of both leasing and buying a car.
The Benefits of Buying a Car
The biggest plus to buying is the fact that you get to own the car yourself one day. From the moment you purchase a car you will look forward to the day you are free of car payments and able to call it your own.
On top of that insurance is usually much cheaper when you own a car rather than if you lease, and you will also have control over how much mileage you put on the car and how often you use it.
The Drawbacks of Buying a Car
The major drawback to buying a car is that your monthly payments are going to be higher than if you had chosen to lease. On top of that you are usually going to have to put a sizeable down payment on any purchased car, which is not usually a requirement to lease.
Depreciation is the other kicker when it comes to buying a car. The hope is that you will be able to build equity with your car, but the actual value of your purchase is sure to decrease quite a bit by the time you have paid off the car. If you take a long time to pay off the car then you may in fact end up owing more on the car than it is actually worth at some point.
The Benefits of Leasing
The big plus to leasing is the fact that you will have to pay a lot less to get a car on your own and maintain it. You will not usually have to put a down payment on your leased vehicle, will not have to cover taxes, and will benefit from lower monthly payments.
Because you only lease a vehicle for a set number of months you only end up paying for the use and depreciation of the car. In essence, you will never end up owing more on the car than it is worth, and you get to enjoy a new car every couple of years.
Finally, it can be quite difficult to get an auto loan that exceeds $30,000, so if you are interested in a car that is over that price leasing may be your only option.
The Drawbacks of Leasing
Leasing a car means that you will always have a car payment each and every month. If that is not something you are comfortable with, and you want to own your own car one day, then leasing is probably not the best option.
The fact that you have to restrict your mileage or face penalties is also a drawback to leasing a car. If you plan on driving a lot you could end up paying a great deal of additional fees, especially if you lease a luxury car.
Also be weary of the fact that insurance is usually higher for leased vehicles, so that can put a dent in your overall savings if you chose not to buy a car.
Deciding to Lease
If after weighing the pros and cons you feel that leasing a car is your better option, then be weary of cars that have a high depreciation rate. Dealers may push these cars more in order to force you to pay for the expensive years of car ownership. You should also always read the fine print and be sure that there are not any hidden costs or additional charges attached to the lease before you sign on.
Once you have made the decision to lease you will have the option to choose between an open end or a closed end lease. Open end leases come with a stipulation that you must buy the car after the period of the lease for a pre-discussed amount. This lease can benefit people who plan on using the car a lot and want to own a car down the road.
Closed leases on the other hand give you the option to just walk away when the term of the lease is over. You can then consider leasing a new car or even buying one if you are more financially stable when the time comes.
In the end, your decision to lease or buy is a personal choice. If you want to one day rid yourself of monthly car payments then purchasing a car could be the best choice. If you are more excited by the chance to drive a new car every few years then leasing could be more beneficial.
Just be sure that you educate and inform yourself when it comes to both options, as that will give you peace of mind knowing that you made the right choice.