As with any big financial decision, it’s important to understand the details of what you’re signing up for especially when emotions and excitement are in play. If you’re purchasing a new vehicle, keep in mind there are two main ways to do so and both have their pro’s and con’s. Read more about the differences between leasing and buying a car below.
Leasing a vehicle:
When you lease a vehicle, you are essentially “renting” the dealership’s collateral for a defined period of time, typically around 3 years. It can be an appealing option to those who like to change cars every few years and don’t want some of the responsibilities that go along with owning a vehicle. Leasing can also be a less expensive monthly option and the majority of repairs are covered under a warranty.
As for the cons, leasing can also be more restrictive as you don’t own the car. Leasing comes with mileage limits and fines are in place for those who go over their miles. At anywhere from 10 to 20 cents per mile, those fees can add up quickly. If you’re leasing, be sure to find out what your contract stipulates. Additionally, you’re responsible for any wear and tear on the vehicle as there will be an inspection at the end of your lease. Any additional damage could result in a charge.
Buying a vehicle:
Some people feel more comfortable knowing that they own a car. They can drive as many miles as they want and change some of the accessories or details with no extra fees or restrictions. And depending on the cost and money down, once loan payments are complete, the owner completely owns the car with no monthly payments.
Purchasing a car can become more expensive when taking out a loan as most lenders require a sizable down payment. There are also interest rates on the loans so be sure to understand what your total monthly cost will add up to and if the interest rate will change during the course of the lease.
Since a car’s value depreciates over time, it will be important to ensure you’ll be able to sell the car for enough money to pay off the current loan should you need to do so. This is also where the length of the loan comes into play as a longer loan period will make the monthly payments lower, but interest compounds over time so you may end up paying far more than the value of the car if you extend the loan length too long.
If purchasing a used car, things can vary in terms of purchase. Most purchases are AS IS . Be sure to fully understand the condition of the car upon purchase because if anything goes wrong or stops working, the cost of any repairs could fall on you. Depending on the repairs needed and the make of the car, repairs can be a big expense.
IT ALL DEPENDS ON YOUR SITUATION:
There’s no black and white answer for whether you should lease or buy. You’ll need to carefully look at all of the pro, cons, and costs involved to determine which best fits your situation. Look at your budget carefully and be honest about your mileage needs and lifestyle before you make a decision.