A Comparison Between Buying and Leasing

A Comparison Between Buying and Leasing

In some cases, buying a car makes more sense while in other circumstances, leasing is a better option. None of these is a bad move for everyone. Rather, there are individual benefits and disadvantages of each option that you must assess before making a final decision. Whether you should buy or lease a car depends on a lot of factors that should be considered. These include the money that you can afford to spend, the time for which you need a car and your driving habits. Compare these factors for both options so that you can make an informed decision for your needs and circumstances. Here are the pros and cons of each option discussed in detail:

Pros of Leasing

When leasing a car, you always have the opportunity to drive around in a new and latest vehicle. There are less maintenance issues since this is a newer vehicle that you can return before it starts aging. The lease can be written off as a business expense to claim tax deductions. The upfront costs are also very low with this option. Often, it does not require a down payment. Even it does, it is a relatively low amount. Additionally, the monthly payments are less and sales tax is also much lower because you need to pay tax only on the value of the car actually used by you.

Cons of Leasing

Many times, the lease agreement is applicable for a limited period and distance. For example, the lease may be effective for five years or 60,000 miles. This means that you can drive the vehicle for only five years and you’ll be liable to pay a penalty for every mile driven over 60,000 miles. Hence, you have to limit your miles or negotiate the mileage before leasing. The financial liability to make payments can also become burdensome in the event if you face any financial hardship. Even without ownership, you will be responsible for the repairs that are not covered by the warranty. You can’t customize the car when you lease and any extra wear and tear will command extra payments.

Pros of Buying

At the time of buying a car, you become its owner to enjoy all the perks of driving it as per your preferences. There is no expiry of lease tenure that requires consistent worry. Also, you need not think about the limitation of miles when planning a road trip with your family. This vehicle is an asset that can relieve you in the conditions of financial hardships. You can build your equity in this car which enables you to make another purchase whenever needed. Also, you can customize it in any manner.

Cons of Buying

Buying a car is a huge investment that requires a lot of financial planning and loan applications often take longer than anticipated. You may need to pay a huge amount for your down payment to lower your monthly payments, as well as other upfront charges. Additionally, a depreciation is incurred on your vehicle the moment you drive it off the lot decreasing its value.

Ideally, you should make a decision according to your needs and preferences. If you love changing your vehicle every two to three years, leasing is a better option but buying is preferable from a long-term perspective.