If you are trying to decide whether you should lease or buy your next car, you are not alone. The traditional method of buying a car may seem more comfortable because it is familiar to most drivers, but it may not be the most affordable solution for you. With a closer look at the pros and cons associated with both options, you may decide that signing a lease for your next vehicle is a preferred option for many reasons
Your Monthly Expenses
Your primary monthly expense for your vehicle is the car lease or loan payment. In most cases, a lease will be the more affordable solution. If you choose to buy a car, choosing a longer loan term may yield more affordable payments. However, because you are buying the car and because cars depreciate in value rather quickly, you may find yourself upside with your car and forced to hang onto it longer than necessary if you make smaller monthly payments on a car loan. A longer lease term should usually only be selected if you make a large down payment so that you can minimize the risk of being upside down in your car.
The Vehicle’s Maintenance and Repairs
When you lease a car, the maintenance and repairs are all entirely covered by terms of the lease. This means that you will not have to pay out of pocket to keep the car in great shape, and you can better manage your finances. On the other hand, when you get a car loan and buy the car, the maintenance becomes your financial responsibility. This includes oil changes, transmission services, brakes service, tire rotations and more. In addition, after the warranty period expires, the repair costs on an aging car can become burdensome to some budgets.
The Initial Fees
When you sign a car lease, you will typically be required to pay an initial fee. This may be between $1,000 to $2,000 in most cases. When you buy a car with a car loan, you do not usually have to pay an initial fee. This will be at your discretion. However, it is usually wise to make a down payment on your car. This is because depreciation begins as soon as you drive the car off the lot. Without a down payment, you will immediately be upside with your car. In addition, if you were upside down with the last car that you traded in, you may have to pay a fee just to pay off that car loan as well as an additional down payment on the new car. As you can see, buying a car can be a rather expensive option when all things are considered.
When You Trade the Vehicle
With a car lease, you typically pay surrender fee. If you went over the mileage list in the lease agreement, you may also have to pay another fee related to this. On the other hand, with a car loan, several different things could happen. Rarely, someone will trade in a car that has equity in it. This usually happens when you make large monthly payments on a short-term loan and when you make a large down payment at the time of purchase. In most cases, however, people have to pay money to trade in a car that has a car loan on it. Remember that mileage also affects car value if you have a loan on it. Therefore, regardless of whether you lease or finance the car, you will lose money if you put more miles on the vehicle.
The decision about whether to finance or lease your next vehicle is not an easy one to make. Many people are overwhelming choosing a lease because it gives them an affordable way to always drive a new car every few years. Because all of the fees and expenses are listed in the lease, it gives you the ability to know exactly how much you will have to pay when you return the car. This makes it easier for you to budget. The lack of maintenance and repair fees also improves your budgeting efforts. As you can see, there are many benefits associated with leasing that make this a superior option to consider.