Buying vs. leasing analysis

When you are in need of a car you might encounter the situation wherein you need to decide whether to buy a car through a car loan or get a car lease. The decision that you would make should not only based on which of the two options has affordable rates. You also need to consider your preference on how to obtain the vehicle and how you would drive the car.

Outcomes of buying and leasing

When you buy a car through financing, you need to obtain loan that usually lasts for 3-5 years. Within this period, you would be paying monthly payments and interest rates. However, you get the ownership of the vehicle as soon as you pay the loan off. In case you want to sell the car you have all the right to do so and enjoy whatever profit you earned from the sale.

Leasing a car on the other hand also involves monthly payments and interest rates. The term of the lease would also be similar to car buying but leasing has different outcome. As soon as the lease term ends, you are required to return the car. This simply means that you don’t own the car and the payments you provided serves as the fees you pay for using the car.

Effects of the two options

Leasing a car only involves the payments for the depreciation of the car. This makes its payment lower compared to the expenses involved in financing a car. The down payment involved on a car lease is also lower compared to the down required in financing a vehicle.

Important warnings

A car lease involves mileage restrictions that are not found in purchasing a car through financing. The usual mileage restriction placed on a car lease can be 10,000 miles, 12,000 miles, and 15,000 miles per year. In case you go beyond this restriction you would be charged with fines commonly calculated in a per-mile excess.  The cost of insurance in leasing a car is higher compared to the insurance premiums involved in buying the car through financing. In addition to this, you are also liable for the damages on the car that you are leasing. You need to handle the expenses for the repairs before returning the car to its owner.

Valuable considerations

Car lease is suited for individuals who want to drive a new car every 2-3 years. This arrangement allows these individuals to avoid owing amounts that are usually higher than the value of the vehicle they drive.  In addition to these, good lease holders know how to handle the mileage of the cars they are driving. Thus, they avoid charges due to excess mileage. Finally, car lease holders know how to take good care of their cars and avoid possible damages. All of these allow them to get the best out of the money they spend on car lease.

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