by Jim Thompson |
Last Updated: January 11, 2021 There are two options available when shopping for a new vehicle, buying or leasing. There are benefits and drawbacks to either, and it’s up to you to decide which makes the most sense for your situation. Here’s a quick look at each option, and what they have to offer.
The Benefits of Leasing
Less money up front – Generally speaking, a smaller deposit is required up front compared to buying.vehicle.
Lower monthly payments – A lease is an agreement to use a vehicle, not buy it, and will, therefore, require a lower monthly payment compares to a loan on a car with similar value.
Greater variety – Because of the intended design of a lease, leasing offers more potential variety than buying due to the ease and convenience of changing out vehicles every few years. Buyers who grow bored of vehicles after a short time will enjoy leasing more in most cases.
The Drawbacks to Leasing
Limited miles – Most leases are structured with mileage limits. Driving over the mileage limit, even by a small amount, can result in hefty fines.
Locked in – Most leases are very expensive to terminate early, binding lessors to the vehicle for the term of the lease. With a purchased vehicle, the buyer has the option to sell or trade in at any time.
Pay for wear – There is also the potential of charges for wear and tear at the end of a lease. The leasing company understands that minor wear is likely, but the lessor will be charged for any major cosmetic or mechanical wear at the termination of the lease. While maintaining a purchased vehicle is also required, the expense is typically incremental.
No actual ownership – When you lease a vehicle, you don’t own it. It has to be given back when the period is over. Because of this, leasing creates perpetual payments.
The Benefits of Buying
Sell or trade in at any time – A purchased vehicle can be disposed of at the buyer’s leisure.
Long-term affordability –As a purchased vehicle will eventually be paid for, the buyer will potentially enjoy a period without car payments.
Modifications and customization – As the owner of a vehicle, you are free to make any modifications you like without repercussions.
No mileage limit – Vehicle owners are free to drive as much as they like, there are no maximum mileage limits or fees to worry about.
The Drawbacks of Buying
Must handle resale yourself – With a lease, the leasing company handles the disposition of the vehicle at the termination of the lease. As an owner, this responsibility falls to you.
Larger startup cost – When buying, there is a significant down payment that must be paid to obtain the vehicle.
Larger monthly payment – Payment on a car note is higher than a lease payment. This fact often limits the buyer to a vehicle of lower price and features.
Both of these options for getting a car have strengths and weaknesses. Consider each carefully as the decision comes down to which better suits your particular circumstance.