Whether you just need it to get from Point A to Point B or you intend to take weekend road trips all summer, going without a car just isn't an option in many places. Unfortunately, purchasing a vehicle can be quite expensive. For this reason, many people turn to leasing instead of purchasing a car outright. Is that really the best choice, though? Read on to learn the differences between purchasing a leasing a car before you decide which option is right for you.
Before you can decide which option is right for you, you need to
know the difference
between leasing and purchasing a vehicle. When you
purchase a car, you pay for the entire worth of the vehicle, despite
depreciation. This means a car that costs $36,000 will cost $36,000 no matter
what. However, leasing a vehicle means you only pay back the amount you
depreciate. If the car that costs $36,000 loses $18,000 of its value over three
years, you'll only pay that $18,000. When you purchase a car, you're
responsible for the cost for as long as it takes to pay for it. When you lease
one, you can choose to continue paying for it at the end of your contract or to
return the vehicle and walk away from the rest of the cost.
Ownership is the biggest difference between leasing and purchasing a
vehicle. When you purchase a car, you own it as long as you keep up with the
payments. When you complete your contract, you keep the car and can either
continue to drive it or choose to sell it. When you lease a vehicle, the
leasing company owns it and you are "borrowing" it through a rental
program. When you complete the contract, you must either sign a new one to
continue using the car or you must return it to the company. Your agreement
will likely have stipulations regarding making any cosmetic or mechanic changes
to the car and whether other people can drive it, as well as how many miles a
year you can drive it.
When you purchase a vehicle, the upfront costs usually include a
down payment and fees such as taxes and registration. When you decide to lease
a car, you'll need the first month's payment and a security deposit, plus fees
for taxes, registration, and the acquisition of the vehicle. Depending on the
company, the car, local laws, and even your credit, other fees may apply.
The difference in monthly payments is often what makes people choose
to lease a vehicle rather than purchase one. Purchasing a car usually means
taking out a loan, which almost always has a higher monthly payment than a
lease does. This is because you're paying a range of fees, such as interest and
finance charges, in addition to the entire cost of the vehicle. Leasing payments
are often lower because you only need to pay for the depreciation instead of
the full cost of the vehicle. In a lot of cases, a lease payment is only about
half of an ownership payment.
Before you determine whether leasing or
buying a car is the right choice for you, consider how far
you'll be driving. When you purchase a vehicle, you can drive as often and as
far as you'd like, although it is important to remember that the more
depreciation you have on the car, the less its trade-in or resale value will
be. Even so, purchasing is probably the best option if you drive a lot. Most
leases limit you to driving between 12,000 and 15,000 miles per year unless you
negotiate more mileage. If you go over the limit, you'll have to pay extra for
exceeding your mileage.
Leasing seems like the best option in a lot of cases, but when is it
truly right for you? Choose leasing if you need to save money, want to drive a
nicer vehicle, don't intend to drive often, and don't mind a lack of
customization. Leasing provides more affordable payments; allows you to drive
an upgraded, higher-quality vehicle and allows you to simply drop off the car
should you choose not to drive it anymore when your lease is up. Leasing also
provides tax cuts if you're a business owner and leasing for company purposes
in some states.
Consider purchasing
your vehicle if you intend to drive it for a long time.
After you make all your payments, you completely own the car and can do what
you want with it. This means driving it as far as you want, selling it or
trading it in when you want, and customizing it to your liking. Additionally,
you won't need to show anyone your maintenance receipts, which means you won't
be penalized if you forget to get a tune-up on the recommended schedule.
Finally, purchasing a vehicle doesn't require you to buy extra auto insurance, which
may end up saving your money.
Regardless of whether you decide that leasing or
purchasing a car is the right choice for you, it is important to do your
research. Remember, if a deal seems too good to be true, it probably is, and
signing on the dotted line before you read all the fine print could leave you
in a world of trouble. Look for car dealerships or leasing companies that are
licensed, professional, and always willing to go the extra mile to answer your
questions. It helps to verify references, check reputations through the Better
Business Bureau, and read online reviews before deciding which company you want
to work with. Finally, consider repairing your credit if
necessary. The higher your score is, the more likely you are to receive the
approval you're looking for and to pay minimal extra fees in the process.
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