Leasing and buying an automobile have similarities. Through each option, you gain access to a vehicle and make monthly payments to the agency that provided it. Yet leasing and buying are inherently different in nature, a difference akin to renting versus purchasing a home. Financial and automobile resources assert that each option has advantages and disadvantages.
Leasing Advantages
According to online financial resource Smart Money, leasing a car requires a lower down payment than buying a car. A down payment is the amount of money that a lessee pays upfront upon signing a lease agreement. Monthly payments are also lower on leased automobiles, since the lessee is paying for only depreciation. For instance, if a $50,000 vehicle is leased and will resell after termination of the lease for $35,000, the lessee pays only the difference, or $15,000. Furthermore, most lease agreements last for three to five years. Therefore, the lessee always has a relatively new car and pays less in repair costs because the lease terminates before the warranty.
Leasing Disadvantages
Leasing an automobile has a full span of disadvantages to go along with the advantages. According to automotive resource Edmunds, leasing a vehicle in the long term is more expensive than buying one, despite the lower payments. The reason for this is simple: a purchased car can be resold to recoup some of the expenses of the purchase price, while a leased car is returned to the dealer. Simply put, leasing a car is paying for something you will never own. Smart Money further points out that insurance companies do not generally recoup the entire expense of a leased car if it is totaled.
Buying Advantages
One major advantage to buying an automobile is that once the car is driven off the lot, it belongs to the buyer. An owned vehicle can be sold through a dealership or a personally brokered deal by the owner to recoup some of the expenses of the purchase price. Online resource Lease Guide points out that those who own vehicles are not burdened with monthly payments once the cost of the car has been paid off. Furthermore, used cars can be purchased at lower prices than new cars, allowing owners to pay off a larger chunk of the purchase price with the down payment and have a lower monthly payment.
Owning Disadvantages
While it's true that the owner of a vehicle isn't required to make monthly payments once the cost is paid off, the payments required on new vehicles are much steeper than those on leased vehicles. Edmunds further points out that car owners inevitably pay substantially more money on car repairs than do lessees because owners are responsible for maintaining a car as it ages and the warranty expires. In lease situations, such responsibility falls to the dealership. Lease Guide, meanwhile, points out that the mid-term cost of leasing versus buying is about the same, so those who don't plan on keeping a purchased vehicle in the long term should consider leasing.
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