Evaluate Pros and Cons of Leasing vs Buying a Car

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When looking for a new car, there are a lot of factors that you consider, such as the color, model, and its unique features. But aside from deciding on the aesthetics for your new ride, here’s one question that probably runs on your mind: How are you going to finance it? Should you just lease a car or buy one?

Buying a car is self-explanatory. You can either pay it in full or in installments through an auto loan. On the other hand, leasing is basically renting a car. You will be required to sign a lease contract and pay for your month-to-month usage.

But regardless of how you finance your car, you’re going to spend thousands of dollars on it. That is why you must guarantee whether leasing or buying works better for you.

In this guide, we will walk you through the pros and cons of buying and leasing a car. That way, you can weigh both options and come to a decision that is right for you.

What are the Pros and Cons of Leasing a Car

Pros

Lower Monthly Payments
One of the reasons why leasing appeals to many American consumers is because it promises lower monthly payments. Most people who choose to buy a car do it through a car loan. Did you know that in 2017, a record breaking 107 million Americans have an outstanding car loan? This is according to data released by the Federal Reserve Bank of New York (FRBNY).

However, one alarming fact that FRBNY also reported is that around 6 million Americans are at least ninety days late in making their car loan payments. So if you are one of those people who want to ensure that they can always make payments on time, having lower monthly fees will definitely sound more appealing — which is something car leasing provides.

Warranty Protection is Guaranteed
Leased cars are typically covered by warranty protection up until the contract ends. This gives you access to all perks included in the warranty, including free oil changes and routine maintenance. With this, you don’t have to worry about experiencing any mechanical issues because the warranty protects you from spending for repairs and maintenance.

Access to a Better Car Model
If you want to always drive the newer car models, but simply can’t afford to do so, car leasing will definitely appeal to you. When your lease contract expires, you can just easily return the vehicle to the dealership, and get a lease for another one.

With that, you will always be driving the latest models that are better-equipped and priced much higher, which is something you probably won’t be able to afford if you chose to pay in full price or finance with a auto loan

Cons

Mileage Limits
One major downside of leased cars is that they come with a maximum number of miles that the lessee can drive per year. Though can be negotiated sometimes, car lease contracts typically have annual mileage limits of 10,000 to 15,000 miles. Take note, however, that for most Americans, this limit is perfectly fine — since they only put about 12,000 miles on their cars each year.

Regardless, these limitations restrict you from driving your car all the time. You must always keep yourself informed how many miles you’ve already consumed, and learn how to budget your miles.

This is really frustrating if you are a type of driver who always goes on road trips or business trips via car. If you went over your yearly mileage allotment, you will need to pay penalty fees for every mile you’ve driven over your limit — which typically cost 10 – 15 cents per mile.

And in case you’re wondering, you won’t get credit for any unused miles.

Fees and Penalties
Aside from the penalty fees from exceeding your mileage allowance, there are also other fees that you might need to pay.

If the car is in a bad shape when you turn it in, you will be charged for those excess wear-and-tear. That’s why if you are just leasing a car, make sure to be extra careful with it. Otherwise, be prepared for the penalties.

Keep in mind as well that you can’t just prematurely end your lease. If you need to get out of a lease before the contract ends, you will find yourself paying hefty termination fees and penalties.

If you can’t keep up with your monthly payments, the dealership may also repossess the car and sell it on auction. However, if they sell it at a price lower than what you owe, you will need to pay the difference.

You End Up Paying More
Lower monthly payments may seem a good deal, but car leasing may be more expensive in the long run. Aside from penalties and other fees associated with leasing, you will need to endure the obligation of paying every month.

In leasing, the car never becomes yours. You are just simply renting it. So when the lease contract ends, you will need to lease another one. This means paying monthly payments again for something that’ll never be yours.

In contrast, when you just buy a car, monthly payments will stop after you have completed paying for the loan. That means that the car will be yours and you can drive it all you want until the wheels fall off.

What are the Pros and Cons of Buying a Car

Pros

Ownership
A deal-breaking advantage of buying a car is ownership. Once the car is fully paid, it is all yours. You can keep driving it or sell/trade it if you want to.

And because the car is yours, you can drive it around all you want. You don’t have to think about mileage limits as you don’t have one.

Freedom to Customize and Modify
As mentioned, buying the car means it is completely yours. And just like other assets you may have, you can freely do anything you want with it — including modifying the car as you please.

This means you can change your car’s color anytime you want, customize the seat covers, or change the floor mats to something that suits your personal style. If you’re someone who loves listening to music while driving, you can even get a quality sound system. Basically, since you own it, you can do anything you want — so your imagination (and budget) is the limit.

The Chance to Recoup Some of the Cost
One great thing about having the ownership of a car is that you can freely sell it whenever you want. This allows you to recoup some of the cost you spent buying the car.

And just a tip, if you want to sell your car at a higher price, take extra good care of the vehicle. This will greatly help improve the car’s resale value.a

Cons

Higher Monthly Payments
Buying a car means that you are owning it. However, this also means that you are required to pay for the full price of the car over the course of the auto loan contract. This results in higher monthly payments, which could be challenging for other people.

Upfront fees are typically much higher as well when buying a car — which is due to the fact that you also need to pay for sales tax, title fees, and other associated costs. If your credit score is not that impressive, there is also a chance that the bank/credit union will require a higher down payment from you in order to be approved.

Expiration of Warranty
Unlike leased cars, warranty for purchased cars expire. This means that you will shoulder all repairs and maintenance costs if your car acts up past its warranty expiration. What’s more is that that can happen anytime — even shortly after the warranty period. Can you imagine how frustrating is that?

But what to keep in mind is that as the car ages, maintenance costs become much higher. As time passes, there is even a chance that repair costs will outweigh the value of the car. especially if it is a major mechanical problem.

However, a simple way to avoid that is to take extra good care of your car.

Buy or Lease: What Choice to Make

Both buying and leasing a car have their own pros and cons, which you must deliberately weigh before making a decision. But honestly, there is no right or wrong choice here. It all comes down to your priorities.

If you feel like buying a car makes more sense, then go for it. Just keep in mind all the advantages and risks of owning one. Likewise, if you prefer to just lease instead, then find a good dealership right away. Just make sure that you understand the basics of leasing, so you’ll end up making the most of your lease.

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