Choosing between leasing or purchasing a car can be difficult, and finances aren’t the only determining factor that comes into play. It involves your personality, your lifestyle, and many other elements that might not be apparent at first glance.
Here is how to choose whether a car lease or purchase is the best option for you.
How leasing works
When you lease a vehicle, you're essentially renting it from a dealer such as Haines Fleet for a certain period. That's usually 36 or 48 months. Once your lease ends, you have the option of returning the vehicle to the dealer or purchasing it at a predetermined amount.
Some dealers or the manufacturers they represent demand a down payment for a lease. The more you put down, the lower your lease payment will be.
Keep in mind that it may not make sense to put too much money down on a vehicle that you'll ultimately be handing back to the dealer. If you're sure that you will buy it when the lease ends, doing so will reduce the final cost.
The pros of leasing a car
Lower monthly payments - The cost to lease a car is typically much lower than to buy one. Little or no down payment is required, and you don’t have to pay any upfront sales tax.
Additional expenses may happen if you exceed the available mileage limit, decide to terminate the lease earlier, or if there is some damage to the vehicle that has not been repaired.
Less expense on repairs - Ensure that a manufacturer warranty covers you during your lease term. That way, you won’t have to worry about a large, unexpected repair bill during the lease. Keep in mind that you are still responsible for regular upkeep, maintenance, and the minimum amount of auto insurance required by your local laws.
Keeping up with tech and safety - If you lease a new vehicle every couple of years, you will always have the benefit of driving a car with the current technology, comfort, and safety features.
No hassle with selling your car - Once a lease term expires, you can just return the vehicle or choose to begin a new lease for a different car. But you never have to go through the trouble of selling a car yourself or worrying about getting a fair trade-in value. Or you may have the option to buy a vehicle at the end of the lease term for a predetermined price. Either way, you will be more relaxed than if you had to deal with all these matters independently.
Some cons of leasing a car
Ownership - This is the major downside to leasing a car. Think about it as if you are renting an apartment - no matter how many months you pay the rent, you do not gain any equity. The same is true when leasing a vehicle. If this bothers you, then buying is the better option for you.
Early termination penalties - If you end the lease early, charges can be as costly as sticking with the contract. On occasion, a dealer may buy the car from the leasing company as a trade-in, letting you off the hook.
Limited mileage - Most leases limit the number of miles you may drive, often 12,000 to 15,000 per year. (You can negotiate a higher mileage limit.) You’ll have to pay charges for exceeding your limits.
Excess damage to the vehicle - Most leases will hold you responsible for anything that exceeds what is considered normal wear and tear. You’ll have to pay extra charges for the additional damage done to the car once the lease period is over.
Customizing the car - Since you must return the vehicle in good condition, any modifications or custom parts you add must be removed. If there is any residual damage, you’ll have to pay to have it fixed, or you’ll need to file an insurance claim and pay a deductible.
Conclusion
When you take a look at the advantages and downsides of leasing a car, the reason why this option is gaining popularity becomes clear.
Leasing has many advantages from a consumer finance point of view. Compared to buying a car, the down payment is usually lower on a leased vehicle, as is the monthly payment. You get to turn in the car after the lease has run out (usually after two or three years) and get inside a new set of wheels.
Some restrictions come with a lease, such as limited mileage and penalties that you would have to pay if there is excessive damage to the vehicle. On the other hand, you don’t have to worry about selling your car or standard repairs.
The key in deciding whether to lease or buy comes down to three big issues: money, time, and your unique driving needs. The final choice is yours, so take all of this into consideration.
