Choosing between buying and leasing is a difficult decision. On the one hand, financing a vehicle entails larger monthly payments, but you own a commodity in the form of your car in the end. On the other hand, a lease has reduced monthly fees and allows you to drive a car you probably cannot afford otherwise.
However, you can fall into a cycle where you are constantly paying for a vehicle. The rise in car leasing isn’t going away anytime soon, with more consumers opting for a lease over a loan than they did only a few years ago. Below we have a look at the advantages and disadvantages of both leasing and buying a vehicle.
Advantages Of Leasing a New Vehicle
On the surface, leasing appears to be a better option than owning. Because you are not repaying any interest, your monthly payments are usually cheaper. Instead, you’re simply borrowing and repaying the difference between the car’s new value, and its residual or predicted worth after the lease, plus finance charges.
One of the most undeniable advantages of leasing is that you get to drive the automobile during its most trouble-free years and that you’re constantly driving a late-model vehicle with a new-car warranty. Additionally, there may be significant tax benefits for business owners. You can drive a vehicle that is more expensive and better equipped than you could otherwise afford. You’ll also enjoy the most up-to-date active safety features.
Free car services and other planned maintenance may be included in the lease. Another advantage is that you won’t have to worry about the car’s trade-in value fluctuating or the struggle of trying to sell it when it’s time to upgrade.
Disadvantages Of Leasing a New Vehicle
As appealing as a lease may appear, it comes with several drawbacks. In the end, leasing can prove to be more expensive than taking out a loan because you are paying for the car during its most rapid depreciation period. Lease agreements stipulate a maximum number of miles that can be driven. If you exceed the contact limit, you will be charged an excess mileage fee. So, be sure you know how much driving you’re going to do.
You won’t get a credit for unused miles, and if you don’t keep the vehicle in excellent working order, you’ll be charged for excessive wear and tear when you return it. When the lease contract term comes to an end, you may be charged a fee. It could cost you if you decide you don’t like the vehicle or can’t make the payments. If you break your lease early, you’ll almost certainly be hit with thousands of pounds in early termination costs and penalties. These fees may be equal to the total price of the lease for the entire time, and they could be due immediately.
Advantages of Financing a New Vehicle
Purchasing a car was once, and still is, a part of many people’s dreams and goals. Purchasing entails acquiring ownership. When buying a car typically involves negotiating over price, so it’s best to do your homework first. There may be a down payment requirement, a trade-in or both, and financing paperwork, which can stretch as long as 80 months or more. Once the repayment plan is complete, the car is practically yours, and there are no more payments.
What’s left is to maintain it, and with the exception of car expenses such as repairs, your budget should be well in the black. Historically, interest rates have been significantly low over the years, with many car manufacturers offering as little as zero per cent for half of the year. When buying a car, you need not worry about travelling within a stipulated mileage bracket. Buyers have the option to trade in or sell at any given time.
Insurance premiums are quite low, and owners who are car enthusiasts can Purchase a Pickup Truck, an SUV, or a car to their liking. A buyer does not have to be concerned about the number of miles on the odometer, and you can sell or trade in the vehicle at any time. Your insurance premiums will be relatively low, and you can modify their car, truck, or SUV however you want.
Disadvantages Of Financing a New Vehicle
The main cons of purchasing a car are that you must make a significant down payment, or you will instantly owe the bank more for the loan than the car’s worth, and monthly car instalments are generally higher than lease payments. In addition, once your warranty expires, you will be solely responsible for all repair costs and car services, including tires. You’ll have more of your money invested in an asset that depreciates. There are numerous benefits of getting extended car warranty so it is advised to look into the available warranty options for your new car.
When you’re ready for a new car, you’ll probably have to go through the agony of negotiating a trade-in or selling your old one. If your goal is to drive a brand-new car every few odd years, buying a car with a loan is not the way to go. Taking out long-term loans and trading early will cost you a lot of money in finance charges. Then you are better off leasing.
The Bottom Line
Overall, the bottom line is if you have two back-to-back three-year leases, it will cost thousands more than buying a car and owning it for the same amount of time even when buyers decide to keep the vehicle for an extended three years, for a total of nine years, even after accounting for anticipated maintenance and upkeep.
If the restrictions of a lease put you off, consider purchasing a certified pre-owned vehicle, well maintained and probably less expensive, from a franchised dealer or obtaining a longer loan term. Whether you buy your new car with cash, a loan, or a Auto lease, you can save money by selecting one that turns a profit well, is reliable, and gets good gas mileage. Do your research, and don’t forget to negotiate for lower prices and interest rates.
