The Advantages and Disadvantages of Buying and Leasing.
Making the final decision on a car can seem like a daunting task. Everyone wants a good, fair, affordable deal that won't take a dent out of their wallet. There are myths about leasing and buying that exist in this market and we hope to clarify some of these misconceptions.
Just about everyone has heard bad stories and nightmares for leasing; such as turning the car in only to be strangled with fee's and mileage overages or body damage. Many of time this is because the lease agreement may not have been pronounced clearly to the consumer or in all reality, the car was neglected. Leasing can be a very pleasant experience.
Pros to Leasing
Lower Monthly Payments. - You are only responsible for paying for what you use on the car. Why pay $300-400 a month for a purchased vehicle when you could be paying $200 based on how much you drive?
Lower Down Payments. - Some leases start at only a $1,000 down and may even be as low as $189 a month.
Newer, Better, Nicer Car for Less - Keep in mind, you are basically "renting" the vehicle for an extended period of time and you only pay on what is used. Think of it this way, the average car buyer only holds on to their car for four years and then trades it in. Every 2 years, Miles Per Gallon increases and in car technology gets better and better. You are getting a newer, more efficient vehicle for close to the same price every two years.
No-Cost Repairs - Most leases average 2-3 years, and remain under warranty for the full duration of the lease. This leaves the owner worry free from heavy costs and repairs. No one likes to have an auto payment and a repair bill.
No Trade-in Hassles - Once the lease is up, every leasee has the privilege to simply hand over the keys. It's that easy, like returning a car to the rental agency. As long as the car is in good condition, treated well and taken care of, (which doesn't take much for a lease) you will be okay.
No Cost Maintenance - Most car companies now through in a no cost maintenance package that covers oil changes, tire rotations, and free carwashes. This can be negotiated out of the deal but it won't save the buyer much cash. Companies know they will have to resell the vehicle when you trade it in, this is there way of making sure all maintenance is up to date when the lease is up.
Cons to Leasing
You don't own the car - If you drive a lot, and far then leasing is not for you. If you keep your car for 5+ years then leasing is not for you. As you will have too many miles on the vehicle to make it worth leasing. However, we must keep in mind that nobody owns their car until the bank hands over the title. 1 out of 10 car buyers will even see their title before their next trade in.
Mileage is Limited - Most leases range from 10-15,000 miles per year. Think of it like a cell phone data plan, stay within your data allowance and you will not be hit with overages, if you are terrified of going over then opt out and go for the more costly, unlimited plan. (Purchase)
Watch your Wear and Tear - If your car is riddled with dents, dings and scratches then you could be hit with a big fat bill for repairs. Same applies to interiors, if you smoke or simply have children who reek havoc on your upholstery then leasing may not be for you. Interiors are costly to clean.
Don't even think about Terminating - If something happens or comes up, and you need out of your lease it can be costly. Keep in mind you are only paying for a portion of the vehicle and you will owe much more than the car is worth. The same thing can happen with car buying, but it is much more likely with a lease.
- You will still have the option to privately sell or trade in your lease, depending on the vehicle's value and equity.
It's high school economics all over again, do you consider long or short term purchases or lease for your vehicles. If you keep your car until it barely runs, then leasing is definitely not for you. If you only like to hold onto your car for a couple years, then leasing could be a great option for you.
When leasing, be sure to understand the car's residual value, money factor and term of your lease.
When buying, be sure to understand your interest rate, final cost, and trade.
Does this mean leasing is better? Not necessarily. Payments are not the only factor that should influence your decision.
Find out more on Car Buying Myths and Misconceptions here.