When it comes to buying a car, you have two options: Leasing, which means that you will have the car in your possession for a set period of time – usually multiple years – before turning it back to the dealer Buying, which means that the car is yours and you can continue to drive
When it comes to buying a car, you have two options:
- Leasing, which means that you will have the car in your possession for a set period of time – usually multiple years – before turning it back to the dealer
- Buying, which means that the car is yours and you can continue to drive it, even after you are done paying the car loan off
Deciding whether or not you want to own or lease a car can be a difficult decision, and what is best for one situation may not be best for another. As such, here’s a guide to the costs and benefits of leasing a car.
Benefits of Leasing
- Lowered cost. There is no question that one of the primary benefits of leasing a car as opposed to buying it is that the cost is significantly lower. This is because the car is never truly “yours,” and you will be returning it to the dealership at the end of the lease. The taxes impact more than just the amount of your monthly payment, as you will likely pay lowered taxes when you lease a car. Furthermore, leasing often has lower down payments.
- Leases are usually easier to obtain. If you have a poor credit history, no money for a down payment, or other financial obstacles that may prevent you from buying a car, a lease is much easier to get. As such, this may be a preferred option for you.
- Since your car is on a set time period, you can lease a car for a shorter amount of time, thus guaranteeing that you get a new car every few years. This can be very beneficial if you are someone who likes to always have the latest technology or equipment in your vehicle. As such, leasing a car – particularly from a dealership that you have a good relationship with – can set you up to regularly rotate your car and help guarantee that you always have a newer vehicle.
- When you buy a car, your warranty is usually limited for a set period of time, and you will have to pay to extend that warranty. When you lease, that isn’t the case, since most car leases have a warranty that will last the length of the contract.
- When it is time to get a new car, leasing is a breeze: All you have to do is hand the keys to the dealer. You don’t have to worry about the car’s value – as long as you have driven under the set amount of miles and kept the car in the agreed upon condition, you will be good to go.
Costs of Leasing
- There are more limitations on leasing. When you lease a car, your payment is usually determined by how many miles you are estimated to drive over the lifetime of the lease. If you drive more than that amount, you will likely pay on a per mile basis – and that can get very expensive. This can become even more problematic if your lifestyle changes, requiring you to drive more than your original lease would have allowed. From a dealership’s perspective, this makes sense, since a car means that the dealership retains ownership over it. As such, they have the right to set certain conditions on a lease, ensuring that they will be able to resell the car at a certain value once your lease expires.
- A leased car is never truly yours, and when you turn it in, there will be an agreed upon expectation for the car’s condition. As such, any significant damage to the car, like scratches or a severely soiled interior, can result in you owing more on the car than you originally anticipated.
- There is no “equity” in a lease. When you sell or trade-in a car that you own, you will likely have some value to the car – particularly if you have already paid off the loan. Unless your dealership gives you some sort of credit at the end of your lease, you will not have any “equity” in the car.
- Less flexibility for a new car. A lease will lock you into a contract. If your financial situation changes, or you want to upgrade your car, it may be difficult to get out of your contract. Furthermore, if you move far away, trading in your car can be a real hassle.
- You will always have a car payment. When you buy a car, you may be able to pay off the car loan before you need a new one. As such, it is possible that you can drive for months or years without any sort of car payment. With a lease, you will always have a car payment. In this particular instance, it is the same as renting vs. buying a home.
As you can tell, at the end of the day, this is a largely personal decision and one that can only be made depending on what is better for you and your situation. Make sure you do your homework, fully understand the costs and benefits of leasing as opposed to buying, and make the decision that makes the most sense for your situation.