Deciding between leasing or buying your next vehicle is a decision that requires knowing the differences between the two. Both options can be useful for certain situations and you should be comfortable in the route you’d like to take before choosing to lease or buy. This blog will attempt to inform you, so you can make the best decision for you.
Leasing a vehicle differs from buying because when you lease a vehicle, you do not pay to own the vehicle. Leasing is an option that allows you to use the vehicle and make payments toward using the vehicle, but you aren’t paying to own the vehicle. This is key in knowing what you need to use your vehicle for. A lease can lead to lower monthly payments and lower upfront costs, but again, you won’t own the vehicle at the end of the lease. Leasing is best for you if you want a new model car every two to three years, want a car under warranty, have a stable lifestyle, can maintain the vehicle well and know how many miles you’ll drive on average in a year.
Leasing is a type of financing, and the payments you make will be on what the difference of the price of the vehicle is now and the projected to cost at the end of the lease, known as depreciation. Because everything loses value over time, you’ll lose money on the vehicle whether you purchase or buy. When you lease, you’ll pay costs upfront like a security cost for wear and tear on the vehicle while you lease it and a finance charge to finance the vehicle. This may lead to lower monthly payments, but you may end up paying for charges and fees when you return the vehicle, depending on the terms of the lease. The cost of leasing long-term will be more than when you purchase a vehicle, but leasing is an option to explore if you are comfortable with the terms of the lease.
Purchasing a vehicle differs from leasing because you are paying to own the vehicle at the end of the loan. You won’t need to return the vehicle, extend your lease or change your terms to own. While this may result in higher monthly payments, this allows you to build equity in the vehicle, but keep in mind you’ll never get the full value of the vehicle back because of depreciation. Buying is a solid option if you don’t mind driving the same vehicle for an extended period; won’t be deterred by possible repair and maintenance costs throughout the life of the vehicle or may have changes coming in your life.
Buying a vehicle will cost more in the beginning because your monthly payments will be higher, but once you have paid off the loan, you will not spend any more money on owning the vehicle. You will continue to pay DMV fees, insurance payments and for maintenance, but you own the car and are free to sell or trade the vehicle for the equity you have earned. Keep in mind that when buying a vehicle, monthly payments will always be higher than a lease, but the long-term cost of buying is significantly less than continually leasing vehicles.
Buy vs. Lease: What should I do?
Both leasing and buying have pros and cons and these should be discussed based on your personal situation. While leasing will not cost as much per month, be aware of added costs when you return the vehicle, such as going over the allotted mileage per year. Also know that leasing to buy will cost more than buying outright from the beginning. Buying a car will cost more in the beginning, but it also allows you to retain the vehicle and any value it has after you finish paying it off. You may also pay more in repairs and maintenance that are out of warranty, but you won’t be hit with fees for driving the vehicle too much in a year. In order to make the most out of your next vehicle, take the time to decide what would work best for you in buying or leasing, once you are comfortable with your payments, it’s all about enjoying the ride.
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