Leasing vs. Buying: Two Different Ways to Drive
Who doesn’t love that new car smell? Leasing a car gives you the flexibility of having that new car experience every few years. When you lease a car, your payments go towards the rental of the vehicle. It can be the cheaper option, with lower monthly payments and lower down payment options than many outright purchased vehicles.
Still trying to decide which option is right for you? Ask yourself the questions shown below.
How much do you drive each year?
Lease: An auto lease may be the perfect option for you if you tend to have shorter commutes. Auto leases typically include a mileage limit that can range anywhere between 10,000 to 15,000 a year. If you plan to exceed the set mileage limit then leasing may become the more costly option versus buying a car.
Buy: The beauty about buying a car is that it’s all yours. You can take it on as many road trips as you want without worrying about going over a yearly mileage limit. One thing to keep in mind is that the more you drive, the more you will have to think about getting maintenance done on your vehicle.
What’s the value of the car?
Lease: A new vehicle can lose up to 30 percent of its value the first year it is driven. When your lease expires, you have the option of switching to a vehicle with the latest and greatest features or you can choose to purchase. If you want to buy after the lease is up, it’s important to compare the car’s residual to its actual value. You may end up with a great deal if you’ve taken good care of your car.
Buy: A car can be a great asset, especially if its a make and model that holds value. If you want to personalize your car, then being a car owner might be the best option for you. Car owners can modify their vehicle to suit their taste and add value to it at the same time. Plus, once a car is paid off, the owner can choose to sell.
Note: Residual value is an estimate of how much the vehicle will be worth at the end of a lease.
Do you want to be responsible for maintenance?
Lease: If you hate paying for repairs, leases usually have a manufacturer’s warranty that covers most repairs for the duration of the lease.
Buy: When you purchase a car outright, the warranty eventually runs out and you will be responsible for any repairs your vehicle needs to stay in tiptop shape.