Okay, so you want to buy a new car. You go to the dealership, know the car you want, but the only thing to consider now is how you're going to pay for it. Usually these two options are known as "leasing" and "financing" a vehicle. I've always wondered what the better option was but it turns out to be situational and based upon individual needs. So, I thought I'd provide for you some of the pros and cons of leasing versus financing a car so that you can make the decision that is best for you the next time you go to the dealership.
LEASING
Pros:
- Get a better car for lower monthly payments.
- Leasing means that you only pay the worth of the car during the period of the lease. Financing a car means that you're paying 100% of the car for a given time. Therefore, the monthly payments on a lease option are always less expensive.
- Since the car is not really ever your's, you "rent" the car for a couple of years then return it for a brand new car. Weeeeee!
- Example: Monthly payments on a 36 month lease for a $40K car is about $400/month. Compare that to the $900ish/month payments on a 36 month finance.
- The manufacturer warranty coverage ensures that you don't pay maintenance costs or parts replacements because, again, the car is not really your's. Also, you'll usually end up returning the car after the lease before any major problems arise.
Cons:
- You don't get any money back. Technically, you'll be pouring thousands and thousands of dollars in payments and upkeeping for something that never becomes your's. It's like you're renting the car.
- The only thing you have to show for the money you put in your car are the memories...once the lease is over.
- Also, there is a trend for higher insurance with leased vehicles.
- With your leased car, you also need to have a compulsive monitoring of your car. Any damages to the car will accrue fees once the car is returned. Also, racking up the mileage on your cars above the quota will accrue fees as well.
FINANCING
Pros:
- When you finance, you get the freedom to do what you wish with your car. Once you drive it off the lot, you don't have any binds to the dealer except for paying your monthly dues on time.
- When the car is all paid off for, you get the option to sell your car and you pocket all the money you make from it.
- Even though you're paying more each month, you're making payments into something with an end. Again, you have freedom with your car because it is your own.
Cons:
- When you finance a car, you're overall forking up a lot of cash. The monthly payments are higher because you're paying for the full value of the car instead of set time of a lease. Also, if you wanted to lower your monthly payments, you'd have to fork up more cash to put a down payment on the car.
-A purchased car has a higher sales tax.
- Though in the long term purchasing a car is an asset, it is one that depreciates in its value. As the saying goes, your car loses its full value the second it's driven off the lot.
Buying a car takes a lot of options weighing. If you're a lower-income person, leasing a car would be your best option. Also, people who don't stack on mileage and don't intend on upgrading their car may see leasing as the better option as well. The vice versa applies for someone who wants to finance. Either way, do your homework and hopefully you'll be driving off the lot with a smile on your face. Happy shopping.
-Rack of Lam
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