While getting around without a car is certainly doable, having one is practically a necessity in today’s modern world. Even though this may be the case, obtaining a car seems to be one of the hardest purchases to make outside of buying a house. There are ways to make the process easier, but no matter what, a car is going to cost you a hefty chunk of money.
For most people, it’s difficult to have the whole amount of the purchase ready in cash. If you don’t have it all in cash at the time of the transaction, however, your options are one of two things: finance or lease. Financing is expensive an often ends up costing you much more than the value of the car in the long run, while leasing is great for people who only want the car for a couple years. Leasing and financing are similar in ways, but fundamentally different at their cores.
When financing, you are receiving a loan to pay for the full price of the car – or a partial amount after making a down payment. Over the agreed period of the loan’s contract, you will make monthly payments that will, at the end of the contract, equate to the amount financed plus some financing fees. The portion of the total price you get financed depends on a variety of factors including your credit score and the amount of your down payment.
Leasing, however, allows you to make a smaller down payment than you would when financing and has you make smaller monthly payments during the term of you having the car. When you lease a car, you are only paying for the depreciation of the vehicle during the time you “own” it. Most of the time, the value you pay for is half – or less than half – of the total price of the car. At the end of the term, you simply return the car.
So Why Should You Lease?
Either method could be beneficial depending on the circumstances surrounding your financial situation, but overall, leasing will give you more bang for your buck in the long term. Leasing is especially good for people who don’t care to own the same car for many years and would rather always have a newer car. This helps cut down on costly maintenance bills for old cars that need to go to the mechanic often.
On top of this, only having a car for three or so years at a time lets you stay up to date with new technology and trends. Cars are always improving as each year passes, and now you won’t have to miss out when something amazing is released. Three years is a short amount of time in perspective, so your lease will end soon and you’ll be able to move on to the next best thing!
Leasing is also great for long term budgeting. When you enter a lease contract, you know exactly how much you’ll be spending (disregarding wear and tear fees or extra mileage fees) by the time the term is over and you return the car. When owning a car, you can never fully budget for maintenance or trouble over time. You also won’t have to worry about having to sell the car once you’re done with it and potentially not getting back nearly enough to cover your losses.
Overall, whether or not you should lease simply depends on what you want out of a car. If you don’t care about having the newest or coolest car out there and you have enough for a larger down payment, then financing could absolutely work for you. However, if you don’t have a lot saved for a down payment and would prefer to have lower monthly payments, in the end, leasing will be the best option for you.
Whether you finance or lease, however, getting a car is a very important process. Always make sure to fully check out all your options and take all factors into account. You’ll want to make sure you have a reliable car that will get you where you need to go but won’t tank your finances and leave you thousands of dollars in debt.