Choosing whether to lease or buy a new vehicle can be a daunting decision as there are benefits to either approach. In order to make an educated decision regarding a new car purchase or lease, you must know the pros and cons of each approach and your own current financial position.
Significance
Buying a vehicle involves the use of financing to purchase the vehicle and payment is rendered to the finance company usually on a monthly basis. When the loan is paid off, you own the car and no longer have any obligation to the bank or financial institution. Leasing a vehicle is similar to renting it with an option to buy at the end of the lease period. Ownership does not come into play in a lease unless you opt to purchase the car for an agreed upon sum at the end of the lease.
Time Frame
One of the biggest reasons to lease is the short time involved. If you seem to only keep the same car for three or less years, a lease may be ideal for you as at the end of the period, you can just turn in your vehicle. If you are within the mileage limits and have kept the car in good shape, you just walk away. Most car loans last about five years and it is often more difficult to switch cars when purchasing as the price paid during the loan period is often substantially higher than a lease. Mileage is never an issue as your intention is to eventually own the car rather than renting it.
Function
Car leasing is intended to help consumer drive cars that would normally not be able to afford to buy. Since lease payments are lower than the cost of buying a vehicle, a consumer can get a higher-priced vehicle for the same payment amount. If he is not interested in owning a car, leasing can be a way of driving a more expensive vehicle. Purchasing a vehicle is for those who wish to keep it past the loan period and see the purchase as high-cost up front, but lower overall ownership cost.
Considerations
When leasing, you must consider the overall cost of ownership and how many miles you will drive during the life of the lease. Since you are essentially renting the vehicle, you must take care of it as if it is not your own. Normal wear and tear is fine, but any damage above and beyond what is defined as normal will be charged to you upon completion. The payments are lower than buying, but at the end of the period, you have nothing of value wherein a vehicle purchased has a used market value.
Warning
When leasing a vehicle, you must consider the amount of miles you will drive as there are substantial penalties for going over the limits as some leasing companies only allow 10,000 to 12,000 miles per year. Some open-ended leases also require that you purchase the vehicle after the lease period ends. If you want to turn it in at the end of the lease and only have the option to buy it, consider a closed-ended lease. If the interest rate you are offered on a car purchase, do not sign the financing papers as there are many options on finding better interest rates including credit unions and online lenders who would welcome your business and may be able to offer a better rate.
0 comments:
Post a Comment