Is Buying a Car Better than Leasing it?
- Car Insurance,
- Aug 30, 2019
A lot of people face this dilemma of whether they should lease a car or simply buy it. It usually boils down to a person’s priorities. For some people, it’s just a means of traveling from one place to the other for others their car is way beyond the ease of transportation. They develop a bond and sentiments with their car. While some people like to change their cars a lot. They like to have the latest versions of cars available in the market.
Depending upon the category you fall in from above, there are various factors that come into play when deciding whether to lease a car or buy it. It’s important to understand what leasing a car entails:
What is Car Leasing?
Leasing a car means that you are renting the car from a dealer for a specific amount of time- normally for 36 or 48 months. Once you reach the end term for your lease, you have the choice of renewing the contract, of returning the car and going for a new one or even buying it at a predefined amount stated in your lease contract.
Is leasing a Car Worth it?
If you are the sort of person who likes to change their car often, leasing is an ideal option. It gives you the best out of the deal. You will have lower monthly payments compared to buying a car. You don’t have to deal with the hassle of selling a car once you are done with it. You can simply return it to the dealer.
When you opt for bank loans, you need to have a great credit card score. You need to seem reliable on paper regarding your credit history or your banks charge you an obscene amount of interest. Whereas leasing companies are far more lenient since they have the option of cornification of the car if you fall short on your lease payments or break any leasing agreements
How does leasing a Car work?
Leasing a car means that you will have to give monthly payments for the right of using the car. Lease payments depend upon a number of different factors:
1- Sale price: You and the dealer mutually decide the sale price of the car.
2- Leasing period: This is the amount of time you want to lease your car for.
3- If you are leasing a car, there is a certain mileage allowed on your car. Which means how many miles you can drive your car for each term. The amount on your increases if you decide to drive your car beyond the allotted mileage.
4- Residual Value: This is basically a form of depreciation. It is the financial worth of the car after your leasing period ends. If you choose to keep the car, this is the amount you will have to pay for it.
How is Buying a Car different than Leasing a Car?
Buying a car as the name suggests means that you will either right away own the car if you decide to pay it one go or you will have monthly loans to take care of. In either situation, it means that you will be the owner of your car eventually.
Even though initially the monthly loans do seem more expensive than leasing a car but in the long run you are saving money. After paying off the loan the car will be yours to do as you please. You can sell it or trade it. You won’t be in a fixed agreement like you would be if you lease a car. Interestingly, the longer you use the car after paying off the loans the less you will have to spend on it compared to the leasing car.
There will be no mileage restrictions. You can drive as many miles as you want on it. There will be no limitations on how you use the car in case you want to install some extra gadgets or customize it according to your preference.
After paying off your loans in the initial years you will have a car that has already taken the worst of the depreciation hit. If you buy a few years old cars, you will have to pay less for it because of depreciation reducing its price.
The Factors to weigh before Deciding Buying vs leasing:
This decision depends upon various factors such as how much you earn every month because when you lease a car you pay lower rates compared to bank loans which charge interest as well. Moreover, you get to pay fewer sales tax on your car as it depends upon the monthly lease payments rather than whole price of the car.
If you are someone who is not very competent at driving or tends to get dents on your car, leasing may not be the best option because of the wear and tear charges which you will have to pay in case you damage the car.
If you are someone who is more focused on saving money, buying a car is a more feasible option for you. Buying a car will cost you less money in the long run. The usage of your car affects your lease payments as well. If you go beyond the agreed mileage limit you will have to pay extra cash. It depends on your lifestyle.
If the nature of your job is such that it requires you to drive a lot or by nature, you are a free-spirited traveler who likes to make traveling plans on a whim, buying a car is definitely a better option since you won’t be answerable to anyone. You will actually be owing to your car.