Buy VS. Lease A Car
Acquiring a car is one of the most difficult decisions you usually make in a lifetime. Since you don’t change cars any other day, the method of getting one has to be carefully picked, calculated and integrated in the budget. Because of the decreasing economy, the average Joe can’t just come up with $20000 just like that to buy a new car with money down. That’s why car dealers have developed all types of incentives and techniques for the client to pick. You as a customer have the possibility to lease a car or to either buy it outright or get a car loan. The huge dilemma is which one to pick, what would it be better, leasing or buying?
The conundrum is that there is no direct answer to this question since this particular situation has to be analyzed separately by each individual.
Keep in mind that leasing and getting a loan for car purchase are too completely different things. With one you finance for your USE of the car and the other enables you to purchase it and make you OWNER. Each technique has it’s own advantages and disadvantages.
When you’re faced with this decision, you not only have to analyze financial priorities, but you also should take your priorities into consideration. Think of what’s most important to you. Would you be more satisfied with having a brand new vehicle to drive around without having to face major repairs during this time, or you’d rather purchase one and set for a long term loan? Or would you rather be an owner and face the higher up front costs or you’d rather go for lower up front costs and no down payment despite missing ownership? You need to think about these questions in order to make a decision that will suit you.
When you’re buying, you’re faced with the payment for the entire vehicle’s value regardless of how much mileage you acquire driving it. Usually you have to pay a down payment, take care of sales taxes by either paying them up front or include them in your loan and pay the monthly fees calculated by the loan company. Keep in mind that credit history counts when getting a loan. A good clean credit history will get you the best deals around. The advantage here is that you have ownership over the vehicle so if you feel like it you may sell it, naturally for its depreciated value.
Leasing is a bit different because there you’re only paying for a part of the vehicle’s value. They evaluate this part according to the period of time you want to use the car. During that time, the car will naturally depreciate since its being used. That depreciation is estimated and for that, you will be paying each month, plus a little extra that is the company’s interest called money factor. When the leasing ends, you simply have to go and return the vehicle, or you have the option of purchasing it for its depreciated value.
Because leasing is a bit more complicated that simply getting a loan, you need to think all things through and take all things in consideration. You have to face money factors, residuals and other fees. Because of these complicated factors, you can easily make mistakes or misunderstand some of the many clauses in the contract. You also have to be careful about the number of miles you receive at the contract signing. Each year you get a limited number of miles usually 10000. Therefore be very careful since each extra mile costs.