The decision can be tough and comes with its own set of pros and cons. We’ll walk you through the process, so you can make an informed decision!
What Is the Difference Between Buying and Leasing a Car?
When you buy a car, you pay for the full value of it and get to keep the car until you decide to either sell it or give it back. When leasing a car, you only have to pay a portion of its value and have the option to terminate your lease agreement when the term is up. The lessor (your finance company) owns the car during the time that you own it and has the responsibility to maintain it according to your state’s guidelines.
Pros and Cons of Buying and Leasing
When you lease, your monthly payment will be much lower than if you bought the car, and it’s very flexible. You can usually terminate your lease agreement at any time, though there are some hefty penalties, such as early termination fees or a big paymen.
When leasing a car, you must maintain its upkeep according to state guidelines and return it in good condition to the lessor (finance company) when your lease contract is up. The finance company will charge you for damages that may have occurred during the time that you had possession of the vehicle.
If you opt for financing, your down payment will likely be larger, tax deductions are not an option, and your monthly payments will increase, as the finance company is taking a bigger risk than if you were leasing.
The main disadvantage of leasing is that you must return the car in good condition when you’re done with it. If there’s any damage or wear and tear, you’ll be charged for its cost when you turn the vehicle back over to the lessor.
Can I Buy and Lease at the Same Time?
It’s possible to get both options on one loan by financing for part of the amount and leasing for another portion of it. This isn’t necessarily better than either leasing or buying alone, but some people like having more control over their option choices, while others like having all of their needs met in one agreement.
How Do I Choose Between Buying and Leasing?
Once you’ve decided whether you want to buy or lease, there are certain factors that you will want to keep in mind.
How much can I afford?
You’ll want to assess your budget, which may include your credit score, employment stability, etc. Decide on the amount of money you are willing and able to pay for your new car, taking into consideration maintenance and insurance costs.
When is the best time to buy?
Buy when you’re most financially stable! If you are planning on purchasing your car within the next few years, wait until you feel like you can afford it. Buying a new or used car is normally an expensive purchase, so make sure that if something bad happens (job loss), you will still be able to make your monthly payments with ease.
Who is financing my vehicle?
This factor may affect whether you decide to lease or buy. For example, if your employer offers an auto financing program for employees, then your employer may pay off part of your car loan every month. This is a great benefit, so you may want to buy your car if it’s being paid off monthly by an outside source! On the other hand, some companies offer their employees the option of leasing instead of buying, so they don’t have to worry about making repairs or setting money aside for maintenance.
How long do I plan on keeping my vehicle?
If you’re purchasing a new car, consider how long you plan on having it. If it’s going to be two years before you trade it in again, leasing may be the best choice.
After the two years are up, you can return your car to the dealership and start leasing again with little to no extra costs!
On the other hand, you may want to keep your vehicle forever. If so, buying makes more sense because you’ll never have to worry about monthly payments again after that!
However, if you always want to drive a new car or are unsatisfied with older car models, leasing may be your ideal choice as it gives you options on getting out of your lease agreement early.
