There are many advantages and disadvantages to both situations. Whether you want to lease or finance your new vehicle depends on your lifestyle and your preferences. Below we have outlined some of the pros and cons of both leasing and buying your car.
Advantages of Leasing
• Lower monthly payments
• Lower repair costs
• New cars every two or three years
• Vehicle has newest safety features
• Pay tax only on portion you finance
When you lease a car the monthly payments are lower because you are not paying to finance the entire cost of a vehicle. The monthly payment is calculated by taking the vehicle’s transaction price and what the car is estimated to be worth at the end of the lease term. Leasing a vehicle is more suitable for car buyers who like the newest features and like to have a new vehicle every few years.
Advantages of Buying/Car Financing
• Gain equity on vehicle
• Can change paint color
• Add new audio system
• Upgrade wheels and tires
• No mileage restrictions
If you plan on driving the same vehicle for a long period of time it is smarter to purchase instead of lease. When you make payments on the vehicle, you gain equity. Once you have the car title, you can make as many alterations as you wish. Another benefit of buying is that there are no mileage restrictions. If you are on the road for business trips or just like to travel, buying will probably be your best option.
Disadvantages of Leasing
• Mileage restrictions per year
• Not able to make any major alterations to the vehicle
• May only qualify with good credit
• Not building any equity
Leasing contracts limit the number of miles you can drive per year. Before committing to a lease, you need to estimate how many miles you drive per year to determine how many miles per purchase. If you underestimate the miles spent, there are expensive overage charges at the end of the lease.
Disadvantages of Buying/Car Financing
• Unknown resale value
• Hefty down payment
• Higher monthly payments
• Risk of upside down loan
Unless you tend to pay up cash up front, you will have to finance your car. Lenders often ask for a sizeable down payment when taking out a car loan, depending on your credit score. Higher monthly payments are also more likely. Lower monthly payments will make the term of the loan longer, in turn making you pay more money in the long run.
Take a substantial amount of time to determine whether leasing or purchasing a car is right for you. Take into consideration key factors such as your budget, credit history and driving needs. Decide what is best for you and your lifestyle.
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