Should You Buy or Lease a Car? Weighing the Pros and Cons
For many people, the choice between car buying and car leasing seems to be very tricky. Leasing usually involves little monthly installments, while the buyer can take an opportunity to own a new model after every couple of years, while buying involves long-term ownership and is not subject to mileage limits. Both options have their fair share of advantages and disadvantages, and therefore, a careful decision has to be made by the car purchaser.
The buy versus lease question does often have a bottom line that depends upon how many miles will be put on the car, the budget one has to put into the transportation mode of their choice, and personal desires. Some people find the flexibility of leasing appealing, while other owners find the investment attractive.
For most individuals, the choice for one option over another will rest with personal needs and personal finances. Being aware of the key facts can lead to making a valid decision.
Key Takeaways
Leasing often provides lower monthly payments.
There is no limit on mileage when a car is owned outright. The personal need and financial condition go a long way in deciding a choice between buying and leasing.
How Car Buying Works
Full ownership is with the person when a car is being bought. With that comes a number of advantages. There also exist several financial and longtime costs associated with owning. Each one will play a role in the decision-making process for potential buyers.
Advantages of Ownership
That when someone buys an automobile, they thereby outright own it. This is, one owning a car is free to modify the same in whatever ways they like without consulting anyone, such that they may repaint them, fix on some after-sale parts, or carry out some interior changes.
Another advantage is that there are no mileage limits. Some leases require that if a set number of miles is exceeded, the driver is at fault. Owners can drive as much as they want, which for some individuals could be quite essential, especially with long drives to work or for road trips.
Once the car is paid off, there are no monthly payments by the owner. This can really save quite a bit over time and allow funds to be utilized elsewhere.
Financial Considerations of Buying
Generally speaking, the upfront cost to purchase a car is greater compared to leasing. A buyer is usually required to put down a payment and finance the rest of the balance owed. Monthly payments may be larger in size, but they build in ownership, not rent.
Finances also need to factor in financing options, such as the interest rates and loan terms. Other probable additional costs include sales tax, registration, and insurance, which may all be higher with an owned vehicle.
Buyers can also build equity in the car. If they later sell their car, they can recover some of their investment. Unlike leases, whose payments do not build any equity towards the ownership of a car, this is a big plus to buying.
Long-Term Costs of Buying
Owning a car also involves a plethora of long-term expenses in the form of maintenance, repairs, and insurance. Older vehicle repair costs can be higher, but provide a good resale value in case proper care has been taken for it.
Long-term costs involve fuel economy and efficiency. Fuel economy models can save much money at the pump.
There is finally the devaluation rate of a vehicle. With time, cars lose value. This, however, can change with various brands and models. Understanding devaluation can help a buyer make a smarter financial decision based on his needs and budget.