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Should You Lease or Buy Your Next Car?

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Are you thinking of buying a new car, should you lease or buy?  Maybe your old vehicle is facing issues or you’re aiming to drive a car with better gas mileage. Before you take action, you have to consider two options – leasing or purchasing a vehicle.

What’s the best option if you want the latest safety features of your car? Is buying a new car a cost-effective way for people who wish to change their ride? Well, let’s find out the answer to these questions in this article.

But before that, let’s first know and understand the following terms:

Leasing

People who lease a car don’t pay for the entire car on the spot. You buy off the car from the leasing company with monthly payments. This means you don’t need to have the whole amount of money You also pay for the depreciation (agreed on the terms of the lease), fees, and interest. You would pay an amount agreed upon signing the lease contract. Then, you pay the balance in the form of monthly lease payments as the contract provides.

The leasing concept is simple, but be mindful of the complex transaction it has. Be ready for the confusing numbers you would encounter in leasing. Always read your leasing contract in full, know what your rights and obligations are.

Buying and Financing

Once you buy a car, you can pay for the entire price of the vehicle using trade-in, financing, and of course, cash. For example, you want to buy a $35,000 SUV, and you need to pay $35,000 for it. Buyers can avail of the down payment with an auto loan, a trade-in in or purchasing the car with cash.

The lender holds the car’s title until the buyer pays off the financing. Then, you would own the car. The famous way of owning a vehicle is buying than leasing it.

Should You Lease or Buy a Car?

Both leasing and buying a vehicle has its advantages. But you have to determine which of these benefits matter to you.  Before you lease or buy a car, consider your budget, goals, and preferences.

Remember: Decide which of these benefits allow you to reach your goals.

lease or buy car keys

Advantages of Leasing a Car

  • Fewer car repair expenses – If you lease a car, you’re covered by a manufacturer’s warranty. Hence, don’t worry about large repair bills.
  • You always drive a new car – One of the remarkable things about leasing a car is you have your hands full with the latest technology and safety features of the vehicle.
  • Low monthly payments – The cost in leasing an auto is lower, unlike buying one. You would pay a small down payment, or sometimes no payment is needed.
  • No “Upside-down”– People who lease a car can keep the vehicle for one to four years. The amount that a driver is paying every month is tied to the depreciation amount during the lease term. Thus, car owners only pay for a car’s depreciation that happens during the lease term.

Advantages of Buying a Car

  • You’re free to sell – Unlike a car lease, the car owner has the option to sell a car whenever he wants. (You can’t do this when leasing a vehicle because there’s a fixed ownership period you need to follow, if not stated otherwise).
  • Pay less after many years – Yes, monthly lease payments are less costly than monthly loan payments. But with a loan payment, car owners can increase equity in the future when they plan to trade in or sell the car.  (Remember: the longer you’re driving a car, it becomes less costly)
  • No mileage limits – Drivers who want an unlimited mileage should buy a car rather than lease it. When you’re leasing a car, expect to have mileage limits.
  • No appearance restrictions – Car owners who buy a car are free to accessorize the vehicle. (Don’t worry! If the car needs repair, you wouldn’t pay for lease extra charges.)
  • Depreciation discount –A vehicle’s depreciation car occur for after a few years. For example, you get a depreciation discount when you buy a 2 -3-year-old car.

So, if you’re looking for a cost-effective way of keeping a car long term, buy a new car with cash and shake off the interest and all other non-sense you get into when signing a leasing contract. But for people who want the up to date car technology and not pay the whole amount on the spot, leasing a car is an excellent choice. Also, leasing allows you to make superior upgrades without losing your savings. But if you have the money, buy the car, no doubt.

Take note: Leasing or buying a car depends on your financial picture. How you use the car or how long you plan on using the vehicle are only a few of the questions to consider.

For a more in-depth guide check the car-buying-strategies website. If you decide to buy a used car, check out our in-depth guide.

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