Leasing or Buying a New car – a Difficult Choice

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If you are one of the many people that are of the opinion that, when it comes to buying a car, that leasing one is not an option because you think that only businesses can lease a vehicle – you would be wrong. It is perfectly feasible for an individual to lease a new car and, in fact, thousands of American citizens do so every year.

So, lets have a look at the benefits and drawbacks of both leasing and buying a car:

Buying a new car – benefits

The main benefit of buying a new car by arranging an auto loan for it is that you will eventually own that vehicle. If you pay cash for it you will own it from day one. Therefore, if you are likely to keep the same car for several years then, as soon as the loan is repaid, you will no longer have to find the money for loan repayments each month.

Another benefit is that you are permitted to sell the car whenever you want.

Buying a new car – drawbacks

You usually have to make a bigger down payment when buying a new car than if you were leasing one so, if you do not have the amount of down payment requested, buying may not be a realistic option. You will usually have to pay the sales tax up front.

Your loan repayments are higher than the lease payments would be because your loan repayments are worked out based upon paying back the full purchase price of the vehicle plus interest. In the case of a leased vehicle you are only paying for the depreciation of the car plus the finance costs.

Leasing a New Car – Benefits

  • A lower down payment is required and some dealers will even waive this requirement.
  • You can replace your car more frequently and, because the monthly payments are lower, you may be able to buy a higher valued vehicle.
  • You will not have to worry about finding a buyer for the car as you will merely have to return it to the leasing company.
  • Maintenance costs can sometimes be included in the monthly payments.
  • Sales tax is payable monthly and based upon the monthly lease payments.

Leasing a New Car – Drawbacks

At the end of the lease term you must return the car to the leasing company unless there is the option to make a further payment to buy it outright. Therefore, you will probably have to take on another lease agreement for a different vehicle resulting in you having to continue with monthly lease payments.

If you do a lot of miles each year leasing may not be as financially viable as buying as any annual mileage above say 12,000 to 15,000 will be charged to you at x cents per mile. Insurance is usually more for a leased vehicle than a bought one because you are less likely to take as much care of it. If you cancelled a lease agreement early the costs will probably be greater than if you sold the car and repaid a loan before the end of the term.

Conclusion

It is obvious that there are advantages and disadvantages of buying or leasing a car and the choice really does depend upon your personal circumstances and preferences. Hopefully, the above will be of assistance to you in making the correct decision.

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