When it comes to choosing a new car that they’re going to drive for the next few years, the lease vs. buy a car debate tends to pop up. While both of these options come with their set of pros and cons, it is best to choose the option that fits your requirements and financial needs. Keeping that in mind, here we are going to take a quick look at whether it is a good idea to lease vs. buy a car.
Leasing a Car
When you lease an automobile, you pay a monthly fee in exchange for the right to drive the vehicle for a set length of time, which is usually for around three or four years. It is important to note that the dealer funds the majority of leases. Initially, to drive your new vehicle off the lot, you’ll normally have to pay a deposit to cover various taxes and fees. Also, during the course of the lease, you’ll make monthly payments to cover the vehicle’s depreciation charges. The amount of miles you may drive the car throughout the lease period is usually limited, and you must return it to the dealer in perfect condition or face additional fines.
Advantages of Leasing:
- Lower monthly payments
- Ability to drive the latest model
- Warranty protection through the lease term
Buying a Car
A traditional auto loan works like this: you borrow money from a bank or some other lender and make monthly payments until you’ve paid off the amount – with interest. The interest on the loan is paid with a portion of each payment, and the remainder is used to pay down the balance. Of course, it goes without saying that the payment will be greater if the interest rate is higher. You create equity as you repay the principal until the automobile is yours when you make the last payment of the loan.
Advantages of Buying:
- No mileage limitations
- No additional charges for wear-and-tear
- Sell or trade-in the car
Choosing between purchasing and leasing is a difficult decision. Buying entails greater monthly payments, but in the end, you own an asset—your automobile. On the other hand, a lease provides reduced monthly payments and allows you to drive a car that you would not otherwise be able to afford. However, you might fall into a loop where you are always paying for a car. For many reasons, the rise in leasing isn’t going away anytime soon, with more consumers opting for a lease over a loan than they did only a few years ago.