Should You Lease or Buy a New Car?
You know you want a new car, but you still have no idea how you'll pay for it. Lucky for you, there are many financing options available, including leasing or buying.
Leasing allows you to acquire a car without a significant loan or down payment. In most instances, a lease agreement requires a down payment that equals about 20% of a car's purchase price. Then, you'll be required to make monthly payments for the duration of your lease.
There are many advantages associated with leasing a car, and these include:
- You won't have to make a substantial down payment. Whereas buying a car requires you to pay the total cost of a car upfront or obtain a loan, leasing a car involves a minimal down payment.
- You can upgrade to a new car every few years. If you buy a new car, you own this car until you decide to get rid of it. Comparatively, once your lease agreement expires, you can return your car to the dealer and get a new one. Or, you can negotiate terms with a dealer to purchase your leased vehicle.
- Car depreciation is not an issue. If your car depreciates in value during the life of your lease agreement, it will have no effect on your lease.
On the other hand, leasing is not for everyone. Some of the disadvantages of leasing include:
- You don't "own" your car. Under a lease agreement, you don't "own" your car. Instead, you essentially "rent" a car for the duration of a lease, and you can return the car or purchase it at the end of the lease.
- You face a mileage cap. Most lease agreements allow you to travel between 10,000 and 15,000 miles annually. If you exceed this cap, you could face steep penalties.
- You will need to take care of your car. A lease agreement requires you to maintain your car's interior and exterior, and failure to do so could lead to penalties.
Of course, if leasing is not right for you, buying a car is always an option. The advantages of buying a car include:
- You own your car. Once you purchase a car, you own it. As such, you can perform any car upgrades or sell your car at your convenience.
- You can drive your car without limitations. As a car owner, there is no mileage cap, and you can drive your car as much or as little as you choose.
- You could save money in the long run. For those who buy and maintain a car, the investment could prove to be more cost-effective than leasing a car.
So which option is better: leasing or buying a car? Ultimately, the answer depends on the individual. If you have limited finances at your disposal and are comfortable keeping a car for only a few years, you may benefit from a lease. Conversely, if you want to own a car, buying is the best option.
Consider the pros and cons of leasing and buying a car closely, and you'll be better equipped than ever before to make the best possible decision based on your individual needs.