When you’re looking to get a new car, it can be an extremely confusing process. The number of options you have, and the variety of ways in which you can get a car, makes the whole experience very bewildering. It is natural to feel a little confused and unsure about what is best for your situation. At this point, many people automatically assume that leasing will be their best bet because it doesn’t require any upfront money or serious financial commitments. However, this isn’t always the case. There are pros and cons to leasing a car as well as leasing versus buying a car. Understanding these advantages and disadvantages can help you make the right decision.
What Is Leasing?
A lease is a contractual agreement in which you use someone else’s property (in this case, a car). You agree to purchase the car at the end of the term of the lease, essentially becoming the car’s owner. Or, some leases allow you to “buy” the car with a small down payment and then turn the car in at the end of the lease. Leasing is a popular option for leasing companies because it allows them to avoid taking a hit on the car’s value if the car is returned at the end of the lease. The leasing company is responsible for any damage to the car. You will typically pay a monthly lease amount and be responsible for any maintenance or repairs that the car needs. When your lease is up, you’re responsible for returning the car.
Pros of Leasing a Car
– Leasing usually has lower monthly payments – Leasing a car can be a great way to avoid putting a large amount of money down at the start of the lease and also allow you to avoid getting a car loan. The monthly payments are usually lower than they would be if you purchased the car. – You don’t have to worry about resale value – Another upside to leasing a car is that you don’t have to worry about what the car will be worth when you’re ready to trade it in or resell it. – No risk of upside down – Another advantage is that if you’re leasing a car, you don’t ever have to worry about getting upside down in your lease.
Cons of Leasing a Car
– You have no equity in the car – A major disadvantage of leasing a car is that you don’t gain any equity in the car. So, if you’re looking to use the equity in your car for a down payment on another car, or if you want to buy another car and sell the current car, leasing won’t work for you. – Lease payments can be more expensive – Another downside is that leasing costs you more in the long run compared to buying a car. The reason for this is that you have to pay the lease’s residual value in the end. – You pay more in taxes – Another risk is that you’re going to have to pay more in taxes since the amount you pay is considered income.
Pros of Buying a Car
– You have an asset that you can use for future funding – If you buy the car, you have something to show for all your money. At the end of the loan’s term, you will have the car in your possession. – You can control how you want the car to look – You can customize the car the way you want. You can choose the color, interiors, and other features. – You don’t have to worry about the car’s value at the end of the lease – If you’re leasing a car, you have to worry about making sure the car is in good enough condition to be worth something at the end of the lease. If the car has depreciated in value, you may have to pay more to end the lease.
Cons of Buying a Car
– You have to put down a lot of money – When you buy a car, you have to put down a large amount of money at the start of the purchase. The amount varies by make, model, and other factors. You may also have to pay for a car loan until the car is paid off. – You have to make sure you maintain the car – Although it’s not as much work as it is to maintain a leased car, you have to make sure you maintain the car and keep it running for years to come. – You’re responsible for the taxes on the car – Another downside is that you’re responsible for the taxes on the car. This means that you’re going to have to pay more in taxes since the amount you pay is considered income.
Should you lease or buy your next car?
Before you decide to lease or buy a car, you first have to decide what you want from the car. There are a lot of factors that go into making this decision and no one factor is the deciding factor. You may want to lease a car if you don’t have a lot of money saved up, and you want to pay less in monthly payments. On the other hand, you may want to buy a car if you can afford the upfront costs, you want to have an asset that you can use for future funding, and you have the money to customize the car. You can also decide on the best car lease or purchase decision based on your situation and needs.
3 Steps to Help You Decide Whether to Buy or Lease a Car
– Figure out your budget – First and foremost, you should figure out your budget. You need to know how much you can afford to spend on a car. – Decide what you want from the car – Once you know how much you can spend, you need to decide what you want from the car. Are you looking for something that is reliable and is going to last a long time? Do you want a car that is fuel efficient? What type of car are you looking for? – Shop around for the best lease and purchase offers – After you decide what type of car you want and how much you can spend on it, shop around for the best lease and purchase offers. You can use these offers to help you make the decision between leasing or buying a car.
Conclusion
The decision between leasing and buying a car is a big one and one that will affect your finances for years to come. It’s important to take the time to make sure you make the right decision for your situation and are comfortable with the choice you make. When you’re leasing a car, you don’t have any equity in the car. So, if you’re looking to use the equity in your car for a down payment on another car, or if you want to buy another car and sell the current car, leasing won’t work for you.
