The decision to lease or buy a car has financial significance. Money is not the only consideration before you decide on the deal. Your lifestyle and your personal taste play a vital role when you decide on Buying Vs Leasing a car.
Buying vs Leasing a Car Pros and Cons:
Buying a car involves borrowing money as an auto loan, wherein you will have to make payments along with interest over a period of time. After you have paid off the loan amount, you can own your car. Leasing, on the other hand, is renting a car. You have to make monthly payments, however, it is not a loan. Money is not borrowed but paid for monthly usage. You can drive the car until the time the lease is active.
Some of the pros and cons of buying vs leasing are given below:
The Pros of Buying a Car –
- You get your own car
After you pay off the car loan completely, you receive your car’s title and the car becomes yours. Leasing a car means you can use the car until the time you have the contract.
- It is cheaper
If you pay off the loan amount early, you can save on interests. If you keep the car longer, you will get more value. With a lease, you have to pay every time, you trade for a new car.
- You can use it as you want
Car loan does not impose excess mileage restrictions or penalties and therefore, you can drive from one city to another. You have a lot of freedom though technically you are not the owner till you pack back the loan amount.
The cons of buying a car:
People often decide to buy cars online. Offline or online wherever you buy cars, you need to have a clear idea of cons:
- Higher down payments monthly
When you buy a car, you have to make a huge down payment. If you have a poor credit score, you may have to put in more money upfront. Your monthly payment will be greater compared to a car lease.
- Depreciation
The value of a car depreciates the moment you buy it. If you keep the car longer, it will depreciate constantly and you will lose its resale value. This may be problematic in case the worth of your car is less than what you owe on the loan amount. The value of a leased car is of no value to you.
- Maintenance cost
After the warranty period of your car gets over, you have to pay for the cost of repair, regardless of how small or big, the cost is. The repair cost at some point in time can outweigh your car’s value.
Lease a car: the pros
- Lower monthly payments
Lease payments are generally lower than car loans because there is not any interest attached to it.
- A new car
When you buy a car, it means it will suffer from wear and tear and within a few years, it will lose its shine. Leasing a car means you can trade off a new car model every couple of years without any strings attached. You will get the feel of a car and can enjoy the benefits of amenities and safety features.
- Pricing is determined
The future resale value is already predicted and included in the lease payments. This way you will not lose money.
The Cons: leasing a car
- Leasing can be expensive
Monthly lease payment might be cheaper initially, however, in the long run, if you lease, you will end up making more payments.
- Restrictions and rules apply on lease
You are restricted to the miles you will drive. You may be charged penalties in case you return a car after the term of the lease ends in not a good condition.
- You do not own it
Leasing a car means you do not own the car. With a car loan, you own it after you repay the loan amount in full.
Whether you should buy or lease a car, you should base your decision after you consider buying or leasing a car difference. Buying is a better option when you drive a lot while leasing is more feasible when you communicate short distances.