Is It Better to Buy or Lease a New Car?

If you are conflicted between the options of leasing a vehicle or buying it, there are many things you need to factor into the decision-making process. Analyzing your priorities might be the first thing, but you need to evaluate many other aspects before deciding.

Before selecting the preferred path, you need to compare the options side by side, in the right way. Since money plays an important role, factor in financial feasibility first. It might be daunting and time-consuming to save the total sum needed to buy a new vehicle. In these cases, you might consider the option of leasing. 

Leasing can be less expensive over the short term, but buying a new vehicle can be advantageous if you consider the long-run impact. Accordingly, weighing up the advantages and drawbacks of both options before making a decision is vital.

How Leasing Works Vs Buying

When leasing a car, the deal resembles more of a rental agreement for a specific amount of time between yourself and the dealer. Most dealers lease vehicles for three or four years. At the end of the lease period, you can either purchase the vehicle or return it based on your preference. On the other hand, when you buy a car, you are the owner and do not have to return it. 

The cost of the vehicle at the end of the lease (if you choose to purchase it) will be predefined in the lease agreement. This contract covers the terms of both parties and the conditions involved, such as the length of the lease, frequency of payments, and other conditions (compensations in case of damages, depreciation effects, and so on). 

Most leases involve monthly payments and contracts generally will feature the option to buy the car at the end of the lease term. Unless the contract permits the same, the vehicle has to be returned to the dealership. In terms of affordability, a car lease payment will likely be lower when compared to monthly payments on a new car. 

The Advantages Of Leasing Over Buying

There are quite a few distinct benefits of leasing a car rather than buying it outright. 

• If you are bothered by high monthly installments, you can choose to lease. This option will ease the struggle as the monthly lease payments are way less than comparable payments of an auto loan
• In a lease, you are relieved from the worry of mechanical failures and other anomalies. In these contracts, your dealer will likely cover most manufacturing issues and defects that arise. 
• Most leases are sustained for three to four years. After the expiration of a lease, you can go ahead for a new lease with another car
• Leased vehicles will stay under warranty during the period, and you might not require anything else. However, routine maintenance checks and servicing are mandatory. When the duration of the lease is over, you do not have to put yourself through the struggles of the resale process. Instead, you can quickly switch to a new lease contract for a new vehicle
• You will also likely be able to afford a higher-end vehicle with a lease than what you can afford to buy outright or finance

 The Disadvantages Of Leasing Over Buying

Although there are qualifiable advantages to leasing, it also has its fair share of drawbacks.  

• When you lease a car, you must make regular monthly payments through the entire lease period. This demands a very stable flow of income
• Getting out of a lease contract is not easy. You might be required to pay the entire amount that is promised according to the contract in one lump sum if you want to exit the agreement
• The major disadvantage of leasing is that there is no equity built up whatsoever. The process is more like renting. You will make monthly payments, but cannot claim ownership over the vehicle. This means that you will not be able to sell or trade the car to get another vehicle
• If you keep the perks of leasing away, you will notice that in the long run, you will end up paying more in this arrangement considering the ‘ownership’ factor
• Leases, in most cases, involve an array of multiple penalties and other fees, including licensing fees, down payment, and security. These penalties are usually charged due to late payments, damage to the vehicle, and breaking of the lease

 How Do I Know What Is Right For Me?

The primary factor that differentiates car financing and leasing is the ‘ownership’ factor. With financing, you will make monthly payments for a specific period, and you will own the car after the loan is retired. However, with leasing, you will return the vehicle after the contract period expires. 

With monthly payments being the common player, you need to consider your priorities and needs before choosing either of the options. Since purchasing a new car involves a big financial decision, you need to get your priorities straight.

Conclusion

Any major financial decision must involve a lot of research and analysis. Compare your options and calculate how much you would conceivably spend and save in each scenario before deciding. Most importantly, in either scenario, you should always negotiate to ensure you receive the best value for your money.