When you’re ready to get a new vehicle, it can be exciting to test drive different cars and choose a model that suits your taste and needs. One of the most important parts of getting a new car is how you’ll finance the vehicle. When you’re ready for the process, there are a few differences to understand between car buying and car leasing to make the right decision for your budget.
Drive a Luxury Vehicle with a Lease
Leasing a car will allow you to obtain a luxury vehicle that you may not be able to afford if you purchased it. Leasing vehicles will allow you to obtain a monthly rate that is often lower than monthly loan payment. A leased car only requires you to pay for the depreciation that occurs during the lease term in addition to a few fees.
Avoid Making a Commitment with a Lease
Most leases are three years long, which will allow you to avoid making a commitment to owning the vehicle if you want to drive a different model at a later date. You won’t have to worry about selling the car once you drive it for three years and can simply return it to the dealership, no questions asked. The process is often considered to be simple and easy.
Gain Equity with Purchasing a Vehicle
You can gain equity with buying a car if you plan to own it long-term and won’t change your mind on the type of vehicle that you want to buy. Once the loan is paid off, you’ll obtain the title and can choose to sell it, which will allow you to receive money back. You can also continue to own the vehicle, which means that you no longer will have to make any payments on it besides the cost of car insurance, fuel, and repairs.
Lack of Milage Restriction with Buying a Car
One of the main drawbacks that come with leasing a vehicle is that you’ll be restricted with the number of miles that you can drive while using the car. If you have a long commute to work each week or plan to travel the country in the vehicle, you can benefit from purchasing a car to ensure that you can drive as much as you choose. Those who live in a rural area may also benefit from buying the car outright.
Drawbacks of Purchasing a Car
Purchasing a car can be risky due to fluctuations in the market, which can cause your vehicle to depreciate significantly. You’re not guaranteed to sell the vehicle for an amount that you desire if the model isn’t as in demand. With leasing, the future value is already predicted and won’t cause you to lose any money once you return it into the dealership. You’ll also need a large down payment to obtain a new vehicle. Most people put down an average of $3,000 to $6,000 on a $30,000, which can be difficult to save for when you need a new car.
Drawbacks of Leasing
Car dealerships don’t allow modifications to be made to the leased vehicle when you use it, which will require that you return it in its original condition. You also won’t have any equity in the car after the term and will lose the down payment that you made once you began leasing it. You also need a good credit score to qualify for a lease.