It’s the age old dilemma facing just about anyone who’s ever had to get a new car; Should You Buy or Lease Your Next Car?
As is the case with every other common dilemma, there is no ‘absolute’ answer. Each option has it’s own set of pros and cons, and it all depends on a set of personal financial circumstances.
First, your finances. Affordability is clearly key, and you need to ask the question of how stable is your job and how healthy is your general financial situation. The short-term monthly-cost of leasing is significantly lower than the monthly payments when buying: you only pay for “the portion” of the vehicle’s cost that you use up during the time you drive it.
Lease or finance. A lot of times the decision comes down to nothing more than personal preference.
I happen to be the person who prefers to lease a vehicle, simply because I don’t want to drive the same car for longer than about 3 years, and I don’t have the time, nor do I want to go through the hassle of selling a car every 3 years.
When I lease, I do so for 36 months. When the term is up, I simply drive the car back to the dealership, and pick out a new one.
But that’s my preference.
If you have a lot of cash up front, you can opt to make the down payment, plus taxes, in cash or rolled into a loan and the interest rate determined by your loan company.
Buying effectively gives you ownership of the car and that feeling of “free driving” that goes with having your own transportation.
If, say, you want to get into luxury models but can’t afford the upfront cash of purchasing the vehicle then you’re a good candidate for leasing. Unlike buying, it gives you the option of not having to fork out the down payment upfront, leaving you to make lower payments that are sometimes similar to the interest rate on a financed loan.
These benefits do come at a cost; terminating a lease early or defaulting on your monthly lease payments will result in stiff financial penalties that can ruin your credit. You need to make sure you carve out the monthly lease payment in your budget for the foreseeable future, at least for the term of the lease.
Besides the financial aspect, making a ‘buy or lease’ decision depends on your own particular lifestyle choices and preferences. Think about what the car means to you; are you the sort of person to bond with the car or would
you rather have the excitement of something new (like me)?
If you want to drive a car for more than three to five years, negotiate carefully and buy the car you like.
If, on the other hand, you don’t like the idea of ownership and prefer to drive a new car every two to three years then you should lease.
Next, factor your transportation needs. How many miles do you drive a year? How meticulously do you maintain your cars?
If you answer is “I drive 40,000 miles a year and I don’t really care much about my cars because I don’t mind
dealing with repair bills”, then you’re probably better off buying.
Leasing is based on the assumption of limited-mileage, usually no more than 12,000 to 15,000 miles a year, and wear-and-tear considerations. Unless you can stay within the allotted mileage limits, and keep the car in a good condition by the end of your lease, you might incur hefty end-of-lease costs.