The classic debate of buying versus leasing a car is sure to continue for the foreseeable future. So how do leasing and buying compare, and how can you determine which is the best option for you? Leasing accounts for nearly 30 percent of all new car transactions, so while leasing suites some motorists, buying still accounts for the majority of car sales.
*Pros for Leasing:
The most obvious benefit of leasing a car is the lower monthly payments, and you have the option of lowering them even more by paying more upfront as a down payment. When you sign a lease, you have the option to, after the length of the lease, trade in your car for a brand-new version or a different car.
This means that you're going to be driving with the newest technology and safety advancements, which you might not have if you decided to buy. Also, warranties typically keep a leased vehicle in great running condition in case anything happens with the mechanics of the car. Depending on the location of the lease, certain tax advantages might also be available.
If you like driving new cars and paying lower payments, then leasing might be the right option.
However, there are some drawbacks to consider.
*Cons for leasing:
Leasing a car means that you retain no equity or ownership in your vehicle. It's like paying to rent an apartment that never provides a return on your monthly investment.
Mileage restrictions and heavy wear fees are additional burdens when leasing. If you plan on traveling a lot or using your vehicle in harsh conditions, then the yearly allowed mileage on a typical lease might not be right for you. About 12,000 miles is standard, but it can range from 9,000 to 15,000 miles depending upon the specific conditions in the lease agreement. This can be confining if you're looking to hit the road on weekends. If you go over the allotted miles, you can be charged up to $0.20 per mile, which can add up quickly.
Not having great credit will also make a lease much more difficult to obtain.
*Pros for Buying/Financing:
The greatest benefit of buying or financing a car is that you own the vehicle, or are making payments to own the vehicle. This way, you have equity in the car and have an asset to your name, instead of throwing away a monthly payment.
Owning a car allows you to drive as many miles as you want and use the car to your liking because it never needs to be returned.
Another benefit of owning a car is that you don't have to have great credit to make it a reality. The interest rates may be a bit higher, but most people are able to get financing toward ownership.
*Cons of Buying/Financing:
Monthly financed payments have a tendency to be higher than a lease payment, as you are responsible for the entire balance of the car, not just the depreciation value.
Once any initial warranty expires, many, if not all, of the repairs become out-of-pocket expenses.
Unpredictable market changes may also occur that lead to you owing more than the car is worth. If this happens while you are making loan payments, then you are still responsible for the entire loan balance. In the case of a lease, that responsibility would be on the lease company.
Many factors should be taken into account before deciding whether to lease or buy a car, including the kind of driving you do, the amount of miles you accumulate in a year, how good your credit is, and how important it is for you to have equity in your vehicle. Each driver should take these factors into consideration before making a final decision.