What you need to know when buying or leasing a car
Acquiring a car is often seen as a straightforward and easy process but there are factors that come into play when considering the options of buying or leasing a vehicle.
If you don’t have the cash to purchase a vehicle outright, you’ll need to know your options, and the pros and cons, of whether you want to buy or lease. Understanding the differences will assist you in making the best choice possible on this large and important investment.
Leasing entails borrowing money from any financial lending institution, where you will be required to make a monthly payment until the loan is paid off. With leasing, the equity of the car improves as you make payments and eventually on completion the vehicle becomes yours. It is worth considering pros and cons of leasing carefully:
- May include no down payment or a lower down payment
- May offer a lower monthly payment
- You are assured of getting the type or model of vehicle you want or need
- Some repair costs are covered by the factory warranty leading to lower maintenance costs
- Possibilities of driving new brands of vehicles in a span of few years
- It can actually be more expensive in the long run
- Restrictions are often imposed such as mileage limits
- It might be confusing, and you could end up paying a lot more than you should
- It is often only applicable to people with good credit
- Leasing often has a lot of hidden fees such as in the wear and tear of the car
- There is no sense of ownership of the car
On the other hand, buying a car is a large investment. With buying, you are borrowing the full purchase of a car.
- There is a sense of ownership of the car
- There are no restrictions so you are free to customize and modify at will
- It the usually the most cost-effective
- There are no penalties for excess mileage
- Buying a car is more flexible since one can sell it whenever you want
- Easy terms and conditions
- It attracts a higher down payment, and monthly payments are sometimes higher
- Maintenance and repair costs are high especially on the expiry of the factory warranty
- You are likely to face trade-in and resale hassles
- Depreciation is tied on your ready cash.
Knowing the pros and cons of buying or leasing a car is valuable before you make a decision on this type of large investment.
Is there anything that you’d add to the list? What has been your experience with buying or leasing vehicles?