Leasing or Buying a Car?

Leasing or Buying a car is a significant financial decision especially when interest rates on loans in the US market is at an all time high. Both have their advantages and disadvantages. But we got you, let’s run you through it.

 

Leasing a Car?

Pros

• Lower Monthly Payment: Starting from a scratch leasing is actually cheaper than the installments you’d otherwise pay, buying the very same car. You are actually paying for depreciation rather than the full purchase price.
• Opt Newer Cars: The leasing term usually lasts 2-3 years and hence at the end of it you might opt in for a fresh and feature rich car. They are also upgradeable, so you can change the car frequently.
• Warranty: Leased cars are usually on manufacturer’s warranty which save you from repair costs and unexpected breakdowns.
• Sales Tax: Major states only let you pay the sales tax on the portion of the car’s value which you’ll use during the lease period. You do pay tax but not on the entire value.

Cons

• Running Limits: Leasing comes with a mileage limit per year which usually runs around 10,000/15,000 miles. If the limit is pushed, companies usually demand hefty fees.
• Not an Owner: At whatever point, you will never own the leased car, during or after the leasing period. You’ll need to return it or get a new one.
• Customization: Leased cars are supposed to be given back as they came, you cannot upgrade or modify components which would attract penalties.
• Wear/Tear Charges: An overly used and bruised car is also charged with penalties at the time of return

Buying a Car?

Pros

• Ownership: Once you pay off the loan on your car, the car is yours, you own it like a property. You don’t have to pay anymore to run it.
• No Restrictions: Unlike leased car, it does not have any mileage limits, drive it as much as you want.
• Customization: You can endlessly customize your car under legalities, which otherwise cannot be done when you lease it.
• Trade-In Value: It is not like you cannot swap your car for a new one, in fact you get a far better trade-in value.

Cons

• Monthly Payments: If a car is bought on a loan then it attracts higher monthly payments than that of a leased car.
• Depreciation: While you don’t worry about depreciation on a leased car, the new car you bought starts depreciating the day you buy it.
• Maintenance: After the warranties end, you need to take care of the car, repair bills and maintenance costs.
• Sales Tax: You pay sales tax on full price of the car which is a big expense upfront.

 

Finally it all comes down to your financial preference, if you need to avoid that high upfront cost. If you like to drive new and don’t drive across the country, leasing is the thing for you. If your personal preference is to keep the car for long, work customizations on it and drive around quite a bit, then buying makes sense.

Leasing or Buying? Depends upon your lifestyle and financial situation.