Pros and cons of leasing a car
If you’re in the market for a new car, you may be debating whether to buy or lease. It’s a big decision. After buying a house, a new car is the second biggest purchase most people will ever make. To help you through this milestone, here are the pros and cons of leasing vs buying a car:
If you prefer driving the latest models or don’t have the credit or money to buy a new car, leasing may be a smart option. A car lease is a contract in which one party permits another party to a vehicle for a specified period of time in exchange for periodic payments, usually monthly installments. Unless your contract has the option to purchase the car at the end of the contract period, you must turn it back over to the lessor.
A typical car lease payment can be significantly lower than your monthly payments would be if you were purchasing the same vehicle and financing it with a traditional personal auto loan. That's because lease payments are based on the depreciation in value of the vehicle over the course of the lease period instead of the vehicle's full value.
Your newer vehicle will likely remain under warranty throughout the lease period and, therefore, rarely require anything more than routine maintenance. With a lease, you never have to worry about any mechanical failures. No matter what, you’ll be covered
Drivers can lease a vehicle that is nicer and more expensive than one they could afford to purchase. Leases generally run for two to four years, and when they expire, you are eligible to sign a lease on a new car. When your lease is up, you don't have to go through the time-consuming resale process. You can jump right into a new leased vehicle and leave the sales hassle to someone else.
Making monthly payments throughout the life of your lease requires a stable and predictable source of income. When you have a lease, it is harder to get out of the contract than it might be to sell a used vehicle.
Car leases typically have a stated (but negotiable) maximum number of miles that the lessee can drive the vehicle per year, known as the mileage allowance. The standard mileage allowance for a private driver lease normally ranges from 10,000 to 15,000 miles per year. If a driver exceeds the mileage allowance, they'll be charged an additional fee per mile. If you do decide to take on the responsibility of a lease, make sure you read the fine print.
Although a lease has a lot of great perks, you’ll often pay more in the long run for a comparable vehicle if you lease it rather than buying it. Leases can also come with many fees and penalties. Upfront fees may include down payment, security, and license fees. Penalties may include default charges for late payments, fees for ending the lease before the agreed-to period, and wear-and-tear charges.
If you plan to keep your car for a long time, modify it or drive a lot of miles, it makes more sense to buy.
Each payment goes toward owning your car outright. Most car loan terms are 4-6 years. After paying off your loan, you can choose between driving the car without payments, trading it in for a new model, or selling the vehicle. If you take good care of the vehicle, the resale value can help you recoup some of your expenses.3
The ability to do whatever you want whenever you want with your vehicle without the fear of additional fees is a great feeling. Even if you have a loan, the car is yours to do with as you wish. When you own your car, you can drive as much as you want and customize to your heart's content.
You can also drive as many miles as you want without worrying about penalties. There also are no wear-and-tear fees when your loan runs out, as there often are with leases. As long as you are committed to driving your vehicle for an extended amount of time and have adequate car insurance coverage, you are unlikely to lose out financially.
With a loan, you're paying for the full value of the car over a few years, which means your monthly payments usually are higher than a lease.
It can be incredibly frustrating when your newly purchased car has a major mechanical problem shortly after the warranty runs out. But when you own a car past its warranty expiration, the costs of all repairs fall on you. As well, excessive mileage and wear and tear will harm your car's resale value, and you’ll be responsible for trading or selling your used car if you want a different one.
In a nutshell, leasing makes it easier to get more car for less money. This is because you only pay for the use of the car for two or three years, instead of paying for the vehicle itself. Buying, on the other hand, frees you from the restrictions involved in leasing, such as mileage caps. The car is yours to do with as you wish.
Ultimately, it's up to you to weigh the pros and cons, determine your needs and decide which choice best suits your lifestyle
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