Leasing vs Buying – this is something many car shoppers are unsure about. While leasing provides the benefits of low monthly payments and the opportunity to obtain a new vehicle every couple of years, there are benefits to getting a car loan and buying.
Below are a few tips you should consider when making the lease vs. buy decision.
Why getting a car loan and buying a car may be best
- No mileage charges to worry about. Drive all you want! Many low payment leases have low mileage allowances, and you could pay penalties if you drive more miles than allowed. Consider the chances that the number of miles you drive now could change in the future.
- Doesn't require significant money down. To keep monthly payments low, many leases require a down payment that is not refundable when you turn in your lease vehicle. Very often, you can get a car loan without making a large down payment. This can vary depending on your credit history.
- No fees or wear and tear charges. No worries about penalties if the kids spill Kool-Aid on the back seat.
- Your payments come to an end – and you can still keep the car.
- Factory warranties are getting bigger, better and longer. In the past, ongoing service was one of leasing’s primary advantages. But now that you can purchase cars with substantial protection, that’s less of a factor.
- Take advantage of manufacturer rebates. Keeping an eye out for deals and rebates may allow you to purchase your vehicle at a drastically discounted cost.
Consider a lease carefully
Leasing might be attractive to you if you always trade in cars to keep them new and you drive a minimal number of miles annually. Take a look at our lease vs. buy calculator to help you decide what the best choice is for you but also consider the points listed below.
- You often have a lower monthly payment with a lease BUT… read the fine print. Many low payment leases have low mileage allowances and you could pay penalties if you drive more miles than allowed. Consider the chances that the number of miles you drive now could change in the future.
- Possible wear and tear fees. Leases usually have “excess wear and tear” provisions. These could cause you to have unexpected charges at lease termination if there has been any damage to your car.
- Continuous Payments. In a lease situation, you will have to turn in your vehicle and likely have another payment to replace it.
- Insurance - If you wreck a car you lease rather than one you own, your reimbursement may be less than what you owe on the lease. You may want to get “gap” coverage to cover the difference. The price of “gap” coverage for your lease vehicle could wipe out a chunk of the monthly price advantage of leasing rather than buying, so bear this in mind.
There was a time when buying was almost always the way to go, especially in the long run. Today, lease contracts have become more favorable for the consumer, and there are instances where leasing can make sense. The key is understanding the advantages and disadvantages of leasing a vehicle, versus purchasing it outright.
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