“So, which is better: buying or leasing a car?”
This question comes up a lot, in all probability because the answer to the question is a subjective one. The real answer here is — it depends. The true value of the benefits of one over the other will vary according to your particular set of circumstances. With that in mind, let’s take a look at the pros and cons of leasing vs. buying a car.
Without question, the biggest factor in favor of leasing is the ability it affords you to drive more car for less money on a month-to-month basis. The monthly payment on a lease is significantly lower than the monthly payment on a purchase. This is because you’ll only pay for the value of the car you’ll consume over the term of the lease and your monthly payments are based upon that fact.
Another advantage is the car will usually be under warranty for the entirety of the lease, as most deals run for three years and limit drivers to 36,000 miles. This means you don’t have be concerned about repair costs at all. Maybe you’ll have to buy a set of tires, but that’s about it.
Hand in hand with the benefit above is the fact you’ll constantly drive a late-model automobile. With styling changes implemented every five years or so on most cars, you’ll always be in a current looking auto.
When the lease is over, you’ll walk away from the car and get another one — or you’ll have the option to buy it and keep it. You won’t have to be bothered with selling it on your own or trading it in.
One more thing: If you’re using the car for business, the lease payment may be tax deductible.
In exchange for paying more each month, you’ll be free to drive as many miles as you’d like. You can tint the windows, add custom wheels and modify the engine, suspension and braking systems — whatever you want.
Once the loan is paid off, the car will be yours. If its value increases, you’ll enjoy the equity generated. What’s more, you can drive for years and years to come with no monthly payments about which to be concerned.
In fact, this is probably the greatest advantage of buying over leasing. Once the car is paid off, you can use the cash for anything else you’d like.
Which brings us to—
You’ll have a monthly payment for as long as you have a lease. In the long run, this will add up to many more dollars spent than if you bought a car, paid it off and drove it for several years afterwards.
You’ll also have outside parties dictating your usage when it comes to leasing vs. buying a car. The mileage limit to which you agreed must be observed, or you’ll pay more. If you want to customize the vehicle, you have to limit modifications to things you can reverse at the end of the lease.
You must also have a strong credit rating to qualify for a lease. What’s more, your insurance costs will be higher, as you’ll have to carry the maximum coverage in all categories.
Your monthly payments will be higher than with a lease and they’ll potentially go on for a longer period of time. Most purchase deals run 60 months at minimum these days. Meanwhile, leases typically run a maximum of 36.
Once the warranty period ends, you’ll be facing the costs of repairing and maintaining the vehicle. This can get rather pricey when the automobile ages and components wear out.
Should you decide to let the car go, you’ll be responsible for selling it yourself (to maximize your return) or trading it in to a dealer (at wholesale price — or less).
The Bottom Line
Basically, when it comes to the pros and cons of leasing vs. buying a car, the short-term costs are lower with a lease and you’re freed of many of the concerns that go along with owning a car. However, the long-term costs of ownership can be less when you buy, particularly if you’re a person who keeps a car for 10 years or more. On the other hand, you’ll drive for free — more or less if you can write the lease payments off as a tax deduction.
Again, it all depends upon your situation — and your preferences.
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