Should I lease or Buy a Car?
When it comes to deciding whether to buy or lease a car there are many things that must be kept into consideration. Perhaps the most common determining factor is your financial situation. People usually decide to lease instead of buying because they cannot afford to purchase a new car and therefore instead opt to make monthly payments. The concept is similar to renting a home rather than applying for a mortgage.
However, just as mortgages may have low monthly payments almost as low as rents, monthly payments of purchased cars may match or even be lower than the monthly lease payments. So why do people decide to lease instead of buying and what are the pros and cons of leasing and the pros and con of buying?
Pros and Cons of leasing
A new car has a special appeal. Many people may not be able to pass the temptation of getting their hands on a shiny new car. The smell of a new car entices many people and many like to visit car dealers just to get a ''feel'' of driving that new model car. As they walk in the car dealership lot, a car dealer then may approach and ''lure'' them into a deal. The finance department takes care of the rest, and within minutes, if their credit is pretty good, they are approved and given the keys of the car of their dreams.
Leasing is a short term relationship. Most leases vary but usually are not longer than 3 years. However, a lease remains a contract and with a contract there are many terms and conditions. Mileage can be an issue. Some contracts restrict the daily mileage you may be entitled to, and most of them have penalties for going over the allotted mileage upon returning the car.
You must also treat the car with white gloves. Upon returning the car at the end of the contract they will inspect it carefully and charge you for damages that are more than the normal wear and tear. The definition of wear and tear is a little murky, so it is best to check with the leasing company their interpretation.
Getting out of a lease contract is almost an unthinkable process. They have made getting out a very arduous ordeal, often quite impossible. There are some websites promising to find people to take over your lease payments but they are not a walk in the park. Think it over very well if you are hesitant in keeping the car for the whole length of the contract.
All these terms and conditions should be gone over carefully with the car dealer before signing any contract. If your car dealer does not explain well or appears to hover over your questions, be very aware and perhaps rethink your decision or have another person help you out.
The largest flaw of leasing is that after the contract is over you end up with having nothing but memories. You will come to realize that you have spent monthly money, but yet remain with no car. However, for some people knowing they had a safe, new and reliable car makes leasing worth it, and upon returning their leased car they will happily sign up for another lease.
Pros and cons of Buying
Purchasing a car and paying monthly is like getting a mortgage. However, homes tend to be an investment that assumes value as time goes by, whereas cars tend to decline in value as the blue book points out.
If you are purchasing a new car, the good thing is that it is ultimately yours to keep. However, realistically the car is not entirely yours until you pay it off. Most lenders will actually hold on to the title until you are done paying for it. So purchasing a car and paying monthly is like a long term lease, the car is not entirely yours until you are done with your payments. Of course, all of this changes if you pay cash for your car and pay it in full.
When purchasing a car you are also purchasing freedom. You can treat the car as you want, you may add features to it, drive it how much you want without worrying about excessive mileage or wear and tear.
When buying, you are actually putting money into something that will be eventually be yours. However, once it is yours, the car will have dramatically decreased in value. You may still attempt to sell it later getting a bit of money back. In some cases, it may be worth purchasing a used car for a few years and then continuing this way. Of course, purchasing cars with high mileage for a cheap price may turn out being a very frustrating and expensive ordeal to deal with in the long run.
Some good deals sometimes may be found from used leased car companies that sell their cars at auctions. They are still young cars with many more years to live.
As seen, the idea of leasing or purchasing a car needs to be a very thoughtful one. Determine what your long term goals are, and what you wish to do with your car. Only asking yourself these questions may help you determine what is the best choice for you.