Buying vs. Leasing a Car: Which is Better for You?
Need a new car? Before thinking about factors like make and model, it’s important to consider your options of obtaining a vehicle. Today, the two most common are leasing a car and buying a car. Each has its benefits as well as its drawbacks, and - most importantly - each has vastly different financing options. It is important to consider all of the above and how each fits into your lifestyle when deciding which avenue is best for you to come by a new car.
If you are a driver that prefers the newest luxury and technology in your vehicle or whose automobile needs are likely to be changing significantly in the next few years, leasing a car is probably the better option. Automobile leasing involves a customer (you) providing monthly payments to a financier in exchange for the use of their vehicle for a short period of generally two to three years. Benefits of leasing a car include a significantly lower downpayment and, according to Forbes, approximately a third lower monthly payments when compared to buying a car. Under a lease, most automotive repairs are covered by warranty, and certain tax advantages are available that otherwise would not be when purchasing a car.
Leasing, however, is coupled with certain drawbacks. Most financiers restrict their customers to annual mileage limits, generally between 10,000 to 15,000 miles, and charge high rates for overages. When it comes time to return a leased car, any damages to the vehicle's exterior or interior, even in the slightest, could result in expensive fees. Insurance premiums and early contract termination can comparatively be quite costly as well. In general, leasing a car will cost customers more in the long run, but provides individuals with higher quality cars for a fraction of their purchase price.
Purchasing an automobile involves buying a vehicle from an owner or dealership, often through the use of an auto loan. The monthly financing payments for these loans can last upwards of 5 years but, once a loan is paid back in full, the car is 100% the customers and payment free for the rest of its lifespan. Owning a car is generally cheaper in the long run and subjects drivers to lower insurance premiums. Owners have greater flexibility in how they chose to use their car, with virtually no limitations except that of the law. Car owners also have the freedom to customize their vehicle however they like and sell their vehicle at a time of their own choosing.
Nevertheless, the option of buying a car does have its disadvantages. The moment a new owner drives a car off of the lot, its value can decrease by as much as 11%. In addition to this rapid depreciation, the downpayment for new vehicles can run customers a hefty 10% of their price tags, a notable expense when considering the alternative. New car owners have to cover maintenance expenditures associated with their vehicles, which are typically higher and more frequent with an increase in usage and time. All in all, buying a new car provides drivers with a vehicle of value and reliability, all the while having the means to travel with independence and versatility.
A new car is a costly investment and the differences between leasing and buying should be carefully considered to ensure your income is being employed wisely. Review the duration, distance, and other demands you expect from a car for your budget and lifestyle. Reflect upon these contrasts and decide which option is best for you.