Leasing Vs Buying

Deciding between buying and leasing a new car can often be a difficult call. On the one hand, leasing offers lower monthly payments and lets you get into a vehicle that otherwise might be financially out of reach. But leasing does lead to a never-ending cycle of monthly payments. On the other hand, while buying means higher monthly payments upfront, the payments will eventually end, and you will own your vehicle.

While it may seem that due to high sticker prices and rapid depreciation, buying a brand-new vehicle does not make financial sense, you might want to think again. Thanks to the strong resale values that many vehicles offer today, plus lower maintenance costs, and lower interest rates, (some manufacturers offer 0% financing), buying a brand-new vehicle may save you money over the long run. Here are a few of the pros and cons of buying a new vehicle:

• Buying saves money over the long term.
• There is no excess mileage penalty when you buy. You have the freedom to drive as much as you like.
• You can make changes to your car as you please.
• Buying provides the flexibility to sell the car whenever you like.
• You can trade-in your car for considerable savings on your next purchase.

• You have to pay a higher down payment to avoid being upside down in the loan (owing more than the car is worth).
• Your monthly car payments are higher than lease payments.
• You are responsible for repair costs once the warranty expires.
• You face trade-in or selling hassles when you decide to get your next car.
• You will have more of your cash tied up in a car, which depreciates in value.

At first glance, leasing may look more appealing than buying. Typically, leasing offers lower monthly payments because you only pay the difference between the car’s initial sticker price and its expected value when the lease ends, plus any finance charges. But do not forget, when the payments end, you will no longer have a vehicle to drive. Here are a few of the pros and cons of leasing a new vehicle:

• You are always driving a late-model vehicle.
• You can drive a more expensive and better-equipped vehicle than you might be able to afford compared to buying.
• Your vehicle will have the latest active safety features.
• You will almost always be covered by the manufacturer’s new-car warranty.
• You drive the car during its prime and most trouble-free years.
• You will always be able to use dealer service for routine maintenance.
• Some leases even include free oil changes and other types of scheduled maintenance.
• You do not have to worry about the car’s trade-in value or go through the headache of selling it when it is time to move on.
• For business owners, there could be significant tax breaks.
• At the end of the lease, you just drop the car at the dealer.

As attractive as leasing a vehicle may appear, there are several disadvantages which include:

• In the long run, because you are paying for the car during the time when it depreciates the fastest, leasing usually winds up costing more than an equivalent loan.
• When you buy, the longer you own a vehicle after its loan is paid off, the more value you get out of it. By endlessly leasing, monthly payments go on forever.
• Over the long haul, the most economical way to drive a vehicle is to buy it and keep it until it becomes too expensive to repair.
• Lease contracts specify a limited number of miles, and you will pay extra if you exceed that limit. Mileage penalties can range anywhere from 10 cents to as much as 50 cents for every additional mile. So read the fine print and try to determine just how much you expect to drive. Also, most leases do not offer rebates for unused miles.
• If you do not keep the vehicle in good condition, the dealer may charge you for excess wear and tear.
• If the payments become a burden, or you just do not like the vehicle, early termination fees and penalties can be quite hefty.
• You will be on the hook for any damage done throughout the lease.

Overall, choosing between buying and leasing a car can often be a tough call. Each choice has its own unique set of advantages and disadvantages. In the end, like most things in life, the decision comes down to personal preferences, lifestyle, and, of course, budget.