Buying a car and leasing a car both have pros and cons. While one might be a good decision for someone else, it might not be the right one for you. When deciding between leasing and buying, ask yourself these questions:
How Are Your Finances?
If you don’t have a lot of disposable income or savings in the bank, you might want to lease a car because general maintenance and repairs are usually handled for you during the term of the lease. If you purchase a car, all repairs are your responsibility after its warranty expires.
Is Your Credit Good?
Good credit can get you a better rate on a car loan or lease. However, lease payments are typically lower than car loan payments. Assuming you put nothing down, a loan is made for the full cost of the car, while a lease is based only on a portion of the car’s value.
Do You Plan to Use the Car for Business?
If you plan on using the vehicle primarily for business, leasing a car may be your best bet. Lease payments can be deducted as an expense on your taxes. You can also lease a new vehicle every few years and never experience the problems that come with owning an aging vehicle.
The following sums up the pros and cons of both leasing and buying a car:
Leasing a Car
- It isn’t usually necessary to put a down payment on a lease.
- General maintenance and repairs are typically included in the full term of the lease.
- At the end of the lease, you have the option to lease a new vehicle or purchase the car for the remainder of its value.
- You must pay a fee when you turn the car back in to the dealership.
- If you choose to purchase the car, you have to pay the full remaining value of the car at the time of the lease expiration, even if it has depreciated.
Buying a Car
- You don’t need to pay many of the fees associated with a lease.
- You can pay cash in full or make payments on a loan.
- Loan payments are generally higher than lease payments.
- You pay for the full cost of the vehicle.
- After the warranty expires, you are responsible for all maintenance and repairs.
Weigh your options carefully before deciding which type of financing is right for you. Talk to your dealership representative for more information, and understand the exact terms of your lease or purchase before making a final decision.