Car ownership is a big decision, and most people don’t usually have the means to afford one outright. A majority of individuals gets loans to finance their purchases, but this option may not be the best for everyone. When you already have a mortgage and other debts to worry about, another loan may seem like a big gamble. Fortunately, leasing is a viable alternative for prospective car owners. The argument of whether to lease or buy is an old one, but currently, an increasing number of Americans are renting cars. Understand what each option offers before you approach a dealership.
The biggest motivation to lease is that you can get more car than you can afford. A rental vehicle costs less up front than buying a brand new one. With a rental contract, you are paying for the vehicle’s depreciation as opposed to when you have to pay for the whole purchase price. What this means is that a car that may have been out of your price range may become affordable if you are paying for monthly rental fees as opposed to loan payments. If you desire to drive a luxury vehicle, you can get to do it.
There is also the flexibility to switch your rides every few years. Once you buy a car, it’s yours, but if you wanted to get another one, you would have to repeat the whole financing process or sell the old one. When a rental contract expires, you can upgrade to the latest model without too much hassle. For a car enthusiast, this arrangement gives you a chance to sample any vehicle you want.
After a rental contract is over, you can walk away and not have to fret over what to do with the car. However, rental agencies have rules about what is considered acceptable wear and tear. If you return a vehicle that exceeds those limits, then you may have to pay extra. Otherwise, the depreciating value of the vehicle does not affect you financially. You can customize a rental car, but then you would have to remove the modifications when returning it.
Owning a car outright has its advantages. For one, after full payments, you can decide what to do with it. If you want to hand it down to your spouse or child, it’s your call. You can have permanent modifications on the vehicle to suit your style. If you intend to own the car for a long while, then buying serves your needs suitably. Unlike a rental, you don’t have mileage limits when you own the car. You can take road trips without worrying about how much distance you have covered.
One big downside to buying a vehicle is that you would have to sell it off or trade it in when you need a change. Because a car depreciates the minute it drives of the dealership, whether it’s a sale or trade-in, it will be for less money than you spent. On the other hand, every payment gives you equity on the car, which is a valuable asset that you can use as collateral next time you are getting a loan.
Financing a car loan comes with a lot of charges that inflate the upfront cost of the product. Besides the monthly installments, the initial expenses include taxes, loan fees, and other finance charges that come up during the transaction.
For someone with a small down payment, leasing is the most sensible choice. The high payments of a loan make it hard for most people to afford vehicle financing. The lower monthly payments are other reasons why getting a lease contract is preferable for some people. Although the math in leasing contracts may be hard to grasp, understand the basics of car rental before tying yourself into an argument. Negotiate terms that will favor your budget and needs for the car. For example, if you drive long distances for work, try to bargain out higher mileage with a rental agency. Note that the duration of a rental contract influences the monthly payment as well, so decide carefully.