When shopping for a car, deciding whether to buy or lease can be confusing, especially if you are a first time buyer. There are a few different factors to take into consideration when deciding if buying or leasing is better for your lifestyle and budget.
Benefits of Leasing
Leasing a new vehicle usually means that you are able to get more car for less money. Typically, the monthly payments will be lower because you’re just paying for the future depreciation of that vehicle, and not the actual sales price. What the car is expected to be worth when the lease is up is its residual value. Monthly payments are based on the amount that’s left over after the residual value is subtracted from the purchase price. For example, if a car costs $30,000, and its residual value is 50% after three years, it would be worth $15,000 at the end of the lease. Your payments would be on the remaining $15,000 and not the full price of $30,000, plus interest, taxes, and fees.
Another factor to consider when deciding whether or not to lease is the amount of money you have saved for a down payment. If you only have only saved a small amount, leasing may be the better option. When leasing a car, the required down payment can range from $0 to a few thousand dollars up front, but the down payment is negotiable. It is important to remember that while many leases advertise low payments, they require a large down payment. By putting down a larger down payment, your monthly lease payments will be less.
If you are someone who enjoys staying up to date with all the latest high-tech features, leasing a car may be a better choice. Since you will be leasing every few years, each new car that you lease will come fully loaded with all the newest features. If you decide to keep the vehicle at the end of the lease, you can do so by paying cash or taking out a loan to finance the balance.
Most leases last up to three years, which is usually the length of many new car warranties. Because of this, the car is typically covered under warranty for repairs for the length of the lease. You will still need to keep up with general maintenance, including oil changes and tire rotations.
It is also important to remember that with leasing, there is a standard mileage limit that you choose, and cannot exceed without an over mileage fee., which is usually 12,000 miles per year.
Benefits of Buying
Are you looking for a car that you can keep as long as possible? If so, buying is likely better for you. Once you have paid off the loan, the car is officially yours. Until that time, the lender is still the owner. By making your monthly loan payments, you are gaining equity in the vehicle.
Probably the biggest benefit of buying a car is that there are no restrictions on the mileage. If you are someone that has a long commute to work or travels a lot, buying is probably the better option for you.
There are many benefits to both buying and leasing a car. It is important to sit down and look at your budget, lifestyle, and driving needs before you make your decision.