Is leasing a car a more favorable idea than buying a car? This is a general question that a lot of households and businesses have to answer in their long-term decision making. Specifically, the questions asked are whether the lifestyle of the user is conducive for leasing or buying, whether the style of driving is acceptable to a rental agreement and whether one is willing to dish out a certain amount of cash. This is surely evidence that acquisition of an automobile is involving and requires many decisions to be made. Of most importance, is making up of your mind with the costs to be incurred on both occasions.
Does leasing a car incur fewer costs?
First of all, to answer this question, it is crucial to note that it is not a blanket rule that leasing is a cheaper technique. Some car users can find it convenient to lease a vehicle and as a result cut their costs while some would see it better to buy the vehicle and in turn save a lot from this decision.
The most classic advantage that buying has over leasing is that while buying has an assurance of owning the car after the terms of payment have been met; leasing requires that the vehicle is returned to the dealer after the fixed period is done with.
However, in buying the car, the value of depreciation must be accounted and charged against the value of the car so as to have its net current value. So, in the case that the net worth of the car after factoring in depreciation is much less than the cost of leasing in the same period, then it would be advisable to consider leasing as the best option.
The key considerations to be made before landing with the final pick of buying or leasing would also include the mileage driven and the ability of the car to maintain its new state. Cars that have the capacity to keep a good condition would attract buying whereas those that depreciated at a faster rate would better be leased. For the buyers, a website is a superb tool for checking on the second-hand prices of cars and therefore an estimate of their residual value is easy information to find.
Of great concern is that if you are not concerned about having a new car after short periods of time, then it would be satisfactory just to buy it once and for all. The advantage would be a cessation of monthly payments after completion of all installments.
One of the advantages leasing holds over buying concerns insurance policies. The insurance companies tend to prefer cars that have been leased as they are less prone to careless driving and handling.
Leasing agencies also charge lower monthly remittances as compared to when buying. The leased cars are most likely to be fitted with security features and also, is given with a warranty. The person in possession is however obligated to incur the costs of repair when the warranty is over.
The pros of car leasing and car buying
The rental of cars was a very unusual activity in most parts of the world. However, this was not the case in the US where 25% of the cars are currently being possessed through leasing. This act has been gaining popularity as the new generation has become accustomed to paying their bills such as the gym, usage of electricity and airtime on a monthly routine. Car dealers have benefited from a rise in demand for vehicles, and the purchasers have acquired the tendency of changing the assets after a short period. Thus, many people have opted for leasing as a better way of possessing cars. With the cost of cars gone a notch higher, the purchasers are slowly turning away from buying and focusing more on leasing. The question to be answered now is whether leasing is a better deal than buying the car.
The meaning of car leasing
Personal Contract Hire is also a term used to mean car rental. It usually involves paying equal installments of a given sum for a fixed duration of time. After the lapse of the period, the car is handed back to the leaser free from any defects. Any defects in the car would attract a penalty.
A Personal Contract Hire would be used instead of hire-purchasing or Personal Contract Purchase because it does not factor in depreciation of the vehicle or its value either. The reasoning, in this case, is that in Personal Contract Purchasing, the Buyer will have the right to own the car as long as he is done with paying up all the installments. On the other hand, for Personal Contract Hire, the leaser has the right to repossess the car when the period of leasing expires, and therefore, no depreciation costs are incurred by the hirer.
In a Personal Contract Hire, the hirer can have brand-new cars at his disposal after short periods of time. This is very hard on the part of a buyer because as he is completing the payments, the car in use is depreciating and after all, he is bound to stay with his vehicle after clearing.
Most of the leasing companies provide their customers with the advantage of maintaining their cars fully. Hence, they always have the benefit of escaping a cost which would have been subjected to them.
More so, it does not have the inconvenience of worrying on whom the car is going to be disposed to. The person in possession only has the obligation of returning the car to the owner in the proper state.
The idea of car leasing proves to be a versatile activity as the hirers have the freedom to own the latest brands of vehicles in the market. This can be an attractive method for business models so as to portray an unusual gesture to its customers.
Concerning car buying, it suggests that the buyer will finally cease to make payments to the seller after the whole cost is cleared. The customer becomes the rightful owner of the car and does not need to worry about issues of mileage.
Most people are split on whether to lease or buy a car. Both processes have their advantages and disadvantages, and therefore it is up to the car users to research on them and make sound choices.
The pros of leasing seem to be less, but in reality, they have much more importance than many might perceive. Especially for profit making entities, rental comes out to bear much weight than buying as their primary purpose is to increase revenue and cut costs. Hiring vehicles for 2 to 3 years would reduce the costs considerably while possessing the new ones.