Deciding whether to lease or buy is a matter of balancing lifestyle and financial choices. While paying cash or taking out a loan is the most common modes of acquiring new cars, leasing is also now common and is no longer reserved for corporate and luxury car buyers.
Leasing gives buyers a chance to acquire more expensive cars than they might be able to afford. Buying offers a better choice based on the financial situation and how the vehicle is used. There isn’t a clear-cut answer to the question of whether to lease or buy but the choice could depend on the following factors.
When you buy a car, it means that you want to have it for a long time. Therefore, this implies that you are required to make monthly payments depending on the entire cost of the vehicle and the value of the loan. You will also have to pay a down payment and trade-in value. Other basic monthly costs include gas, insurance, and repairs. When you lease, you only pay for the residual value that occurs during the lease term with lower repair costs which are covered by the company warranty. You will, therefore, have lower monthly payments and no down payment.
Buying is probably the best option if you want to own a car whose title belongs to you. When you buy, especially through a loan, you get to have all the ownership rights when the loan is paid off. It gives you more flexibility because you can sell the car if you want or use it as a trade-in on the next car that you’ll buy. Since you don’t own the vehicle when you lease, it must be returned to the owner once your lease term ends. However, you still have the option of buying the vehicle once the lease term ends. When you own the car, its cash value is yours even if the vehicle depreciates. With a leased car, the future value won’t have any financial effects on you but negatively will have no equity in the vehicle.
Whether you lease or buy, you have the option of modifying or customizing the car as you like. However, no restrictions apply when you purchase the car. When it comes to leasing, you don’t have so many options. You are limited in vehicle customization because the leaser will want it in a sellable condition upon return. Any installed modifications will have to be removed before you return the car. You’ll also have to fix any residual damage.
Another advantage of buying a car is that there are no restrictions on mileage. You have the freedom to drive as many miles as you wish. Buying a car can be more beneficial to those who stay in rural areas or have a significant commute. On the other hand, leasing agreements have mileage restrictions which if broken, you might end up facing stiff penalties. The common mileage restriction is 12,000 miles, but the standard range is between 9,000 up to 15,000 miles per annum. However, depending on your needs, you can request for an increase in mileage.
There no one-size-fits-all answer to the issues of buying or leasing. You need to carefully consider the pros, cons, and costs to determine which option is the best for you. You ought to look at your budget, credit history, and lifestyle needs before you make a leap. To seek advice from professionals regarding financial issues on leasing vs. buying a car, please do not hesitate to contact Rocky Mountain Credit Union today.
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