One of the most significant financial commitments you can make is buying a new car. You need to factor in maintenance, insurance, gas, and the initial deposit fee into your budget calculations.
Even though we spend heavily on our new vehicles, we cannot do without them because they are quintessential for a more comfortable lifestyle.
On the other hand, some people are stuck between leasing and buying a vehicle. If you want to make decisions that would prevent you from spending much, you need to consider the merits and demerits of leasing.
Buying a Car
Buying a car is a phase that has been done repeatedly. You might want to take a bank loan to get the vehicle; then you pay the monthly fee till the loan is fully paid. Using this means implies that the car is yours and you are free to use it the way you like.
There are several advantages of buying your car. First off, the monthly payments are for the real owner of the car. Next, you don’t need to bother about extra fees when you agree to purchase the vehicle because the costs are advanced payments.
Also, when you are buying a car, you have the privilege of selecting from a broad range of colors, models, transmissions, and the likes. You also have the chance of totally revamping and customizing your car to your taste.
Also, you can consider resale value during purchase. This means that when you make the right selection, you can buy a vehicle that has value and would still give you some more money when you sell-off.
You will own the car and keep it for as long as possible. However, with a lease agreement, you will not be able to trade-in or sell the vehicle.
Because you are paying for the car and other finances like interests, your monthly expenses will most likely be more than a monthly lease. Another financial constraint is value loss. If you sell the car, it could lose its resale value, and this means you will not make much cash as expected.
To wrap it up, buying a car is relatively easy. You pay your debts completely, and the vehicle is entirely yours.
Leasing a Car
Leasing a car is not as easy as taking a car loan. People who lease cars pay monthly, but the car doesn’t belong to them. It is similar to renting a vehicle in the long-term. In some cases, you have the option of purchasing the car when the lease period is over. However, the conventional way is returning the car to the dealership.
Leasing is very popular now, and according to statistics, the market has grown by 91% in the last five years, which is mind-blowing.
Paying monthly for a car lease is quite affordable. The reason is you will be paying for taxes, the vehicle’s depreciation, interest and fees. Usually, the down payment is more affordable, and not all dealerships request it.
With leasing, you have some options. First off, you can change your vehicle once in two or three years. So, for those who love moving with trends, you can enjoy the latest cars. And with the little lease threshold, you do not have to worry about the expiration of the warranty and payment of repairs.
When you sign a lease, it removes the inconvenience of reselling the car instead of moving on. With leasing, you return the car to the dealership. Leasing is great for anyone who needs a short-term contract, or anyone who does not have interests in selling a vehicle.
A good number of times, the monthly payments, which is lower, is the leasing threshold on the vehicle’s mileage. Most leases permit 10-15,000 miles in a year based on the contract. With a lease contract, you might not be able to use the car to its full mileage potential.
If you drive above the permitted mileage threshold, you will pay additional fees, and this is nothing to worry about if you own the car.
Also, there is an extra cost involved when leasing a vehicle; this is known as the gap insurance. This additional cost is not compulsory, but it is mandatory in case anything happens to the vehicle. In some instances, the hirer may have to pay from his pocket for the outstanding balance of the car if it is wrecked, and this can amount to thousands of dollars.
With Gap insurance, that cost is covered, and it is a quintessential need for you. However, you will be paying for something that you might not use eventually.
When the leased car is returned to the dealership, you might be held accountable for physical damages like dents and scratches, and you would have to pay.
Your lifestyle determines the best choice for you
If you are stuck between buying and leasing a car, you don’t need to rush the decision-making. You need to weigh the merits and demerits and see which is favorable for you.
Most dealerships offer leasing and financing options. And if you don’t know which to go for, it is crucial to do your research. You can also consider auto loans and some reasonable interest rates and check online for lease deals in your location.
After proper research, you will either find a deal that makes sense to lease or buy.