The difference between buying a car and leasing a car is evident once you begin to look at the two financing options side by side. The obvious pure benefit of buying a car is that you will own it after you’ve finished making payments. If your financial situation isn’t steady, though, there’s a good chance you will fall behind on payments and never end up owning the car at all. To prevent this, there’s a lower short-term way to drive a great car, and that option is called leasing a car. It has obvious pros and cons.
Pros of leasing a car
1. Shorter commitment: Because you return the leased car at the end of the lease, you’re looking at a shorter duration of payments. This gives you the freedom to drive a different car at the end of the lease. You can either buy it or lease a completely new car. Some people don’t need or want a long term commitment. Leasing is your way out of the long-term commitment.
2. Lower down payment: A down payment on a new car can be very costly. Some people don’t have the money and others have it but aren’t ready to commit to buying a car. Because of the lower down payment, it’s possible to lease even a luxury car and afford to drive it.
3. Lower monthly payments: Gotta love this part of leasing. The lower down payment is less out of pocket every month, freeing up room to grow a savings and buy a car later. It’s a great way to keep yourself in a beautiful, reliable car while saving to buy one down the line.
4. GAP protection: Leased cars have something called GAP protection. In the event of an accident that your insurance doesn’t cover entirely, GAP coverage will take care of the rest of the damages if a car is totaled.
Cons of leasing (Pros of buying)
1. Ownership: This is the biggest asset of buying. You’ll one day own the car. This means another of the great benefits of ownership.
2. Modify your car at will: Want a new fresh paint job for your car? You have the freedom to do that if you buy.
3. Gain equity in car: Since you’re making payments toward ownership, you’ll gain equity in the car as you go along. This isn’t going to happen with a leased car.
Which is better?
The factors in deciding whether or not to lease are many and it’s impossible to decide based on a short list of pros and cons. If you’re someone who can’t afford to buy a luxury car but want to drive one anyway, leasing frees up that option for you. Make sure you have acceptable credit if you lease as well because a leased car requires better credit than if you buy a new or used car.
On most occasions, leasing is the right choice to make if you are on a strict budget for a few years. If there are other things you want to acquire before jumping into car ownership, then leasing is the perfect way to continue driving a beautiful car without having to pay the same down payment and monthly payment fee as you would have to in order to buy that car. Leasing is an often overlooked alternative to buying and rarely gets the credit it deserves in a world far too fixated on the subject of ownership.