Buying vs. Leasing: Advantages & Disadvantages
One of the most important decisions you will need to make while purchasing a car is whether to buy or lease the vehicle. There are a number of factors to consider before you choose to lease or buy. The following tips will help you make the right car purchasing decision.
Leasing a car finances your usage of the vehicle. Every month you pay a set amount toward the cost of your vehicle. At the end of the lease, what you have paid represents a percentage of the vehicle’s total cost when you started the lease. You may also need to pay a fee at the end of the lease to cover the cost of the car being prepared for the next lessee or buyer and any damages that extend beyond normal wear and tear.
When you buy a car, whether in cash or financed with a car loan, you become owner of the car and the equity it carries once the entire cost has been satisfied. Even before you finish paying for the car, the percentage of the equity you own in the vehicle will count as one of your personal depreciating assets. If you finance the purchase, you will make monthly payments until the loan is repaid plus interest. Should you choose to trade in or sell your car after purchasing it, you will be entitled to the depreciated fair market value.
There are specific lifestyle and financial benefits to leasing a car instead of buying. The first is the ability to drive the car you want without needing to commit to ownership right away. This benefit is attractive to drivers who enjoy the idea of having a different car every year but who cannot afford to buy that many vehicles outright. Also, you will not need to deal with routine maintenance on your own, as leased cars are generally serviced by the dealership.
The biggest benefit of choosing to buy a car is that at the end of the payment process you will own a large asset that can improve your financial standing. The process of purchasing a vehicle, even with an outside car loan from a bank, is substantially less complex than leasing. A leasing agreement contains a number of stipulations that can be misconstrued, unlike simple loan terms that are generally standard among most financing avenues.
Even though there are advantages to both leasing and buying a car, leasing is only the best option under specific circumstances. More often than not, buying your next car is the better choice.
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