Here you are, trying to choose between buying a car or leasing one. Both options may sound good, but the fact is that one offers more benefits, even though it is often overlooked. The following should help you understand the difference between car leasing and car buying.
Most people purchase a car because they will eventually own the vehicle. This is drastically different from leasing a car since you are renting it until it is time to return it.
This is just one reason why people opt to buy a vehicle, but there are others like the following:
- The car’s value is in your hands, so you can borrow against the car.
- It is your car, so you can make changes if you want.
- No need to worry about excessive wear because the car is yours.
- There are no mileage caps.
These are a few benefits of purchasing a car, but there are reasons why some people think twice. For example, you will need to pay a large down payment when you purchase the car.
You also have to worry about buying a depreciable asset, which means your car will be worth less than what you paid for it by the time you are done paying off the debt. If you want to get rid of the car at some point, you will also have to worry about selling or trading in your vehicle, which is hard due to the depreciation.
Others also notice that the interest rate and monthly payments end up being a lot more than what people who are leasing pay. This is because those who purchase a car are paying monthly payments based on the value of the car while leasers pay the depreciation value of the lease term.
Okay, so now you know what’s involved with buying a car and its many shortcomings. Leasing a car has a number of positive aspects, but it is not perfect. The following are some of the negative aspects of leasing a car:
- There is a monthly mileage cap and a fee for additional miles.
- You cannot make drastic changes without facing penalties.
- You do not own the vehicle.
- You must keep up with car maintenance.
- Penalties are charged for early termination.
These negative aspects might make it seem like leasing a car is quite limiting, but the good aspects outweigh the negative ones. For example, you do not have to worry about major repairs; that is the dealership’s responsibility. This is great because serious issues could cost more than $800, so this should definitely lift some weight off your shoulders.
Another aspect that people love about leasing a car is that a down payment is not due at signing. There are a number of fees and taxes but nothing close to the amount required when you purchase a car. Now, this is not to say that you do not have the option of putting down a large down payment if you want.
The monthly payment is small as you are only paying the depreciation value rather than the entire value of the car, which was mentioned earlier. Of course, once the lease is over, which is typically in two to three years, you will turn in the vehicle. You can choose another vehicle that you like and start over again.
Those who do not want to deal with the issues that come along with buying a car should definitely consider leasing a car instead of buying one.