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Buying a car is not only a major financial decision but it is also a long-term investment. Therefore, it only makes sense to consider all your options before your credit a hefty amount from your bank. Buying and leasing are two main ways of getting a new car. Both have their merits and demerits. However, one might work better for you than the other based on your preferences and circumstances.
Buying vs. Leasing a Car
When you opt for leasing a car, you get to enjoy a new car every few years. Cheery on the top – you can forget about having to deal with the hassle of finding a suitable buyer for your car when it comes to selling. All you have to do is hand back the keys to the dealer and you’ll get a new lease. However, the car is never truly yours. You can keep it on lease years but ultimately you will have to return it.
On the other hand, when you buy a car on loan, every payment you make builds equity. Once you have paid the amount in full and the loan has been paid off, the car is yours. It becomes your personal asset and you no longer have to pay anything to continue using the car. You can even sell it to make a profit on it. The good news is that you can save even more money if you pay in cash or pay upfront instead of getting a loan.
Things to Consider
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1. Duration
How long you plan on keeping the car is also one of the major considerations. Imagine you are into buying SUVs, if you want to drive it for no longer than a few years, it is better to lease the car. However, if you are looking for a long term solution and see yourself driving it for years to come, buying is a better option.
2. Car Usage
This is another important factor that you must keep in mind. Lease agreements typically include terms about the number of miles that you can drive on the car. If you drive a lot and exceed the set limit, you will probably have to pay some additional amount for each mile. In most cases, if you buy the additional miles up front, you can negotiate the terms in the lease agreement.
However, paying extra for each mile once you cross the limit is a little daunting for most people. On the other hand, if you buy a car, you can drive it as much as you like. However, if you go out to sale it, you will realize that the more miles it has on it, the less will be its value.
3. Budget
Buying or leasing a car is a big investment. Therefore, you need to be smart about it. Keep in mind that there’s a lot more that you may have to invest in monthly than your car. This makes it important to budget your monthly income according to make sure you don’t spend all or most of it on your car expenses.
So, how exactly can you do that? Well, keep in mind that with a lease, you are merely paying for the depreciation in the value of the car rather than its full price. This is why leasing a car usually has a lower monthly payment as compared to buying a car. Therefore, if you are low on budget, leasing a car may be a better option for you. On the other hand, if your monthly cash flow permits it, it is advisable to go for buying since it will make sure you have your own car in the end.
The bottom line is that there are certain advantages as well as disadvantages of buying or leasing a car. It is up to you to decide which option suits you better. Consider the above-mentioned points in mind to make the right choice!