So, you want to get your first car. Or maybe, your car is already worn out, so you want to buy a new one. Otherwise, it might just be that you want to switch it for a better one with lower mileage. Understandably, you could also want to save costs.
Whichever the reason for which you are looking to acquire a car, you will most likely want to consider either to buy or to lease — which is always a tough call. Depending on the nature of the two arrangements, costs, and needs, here is a guide to help you make the right move.
Leasing a Car vs. Owning a Car
For many years, auto leasing has always been a popular choice with luxury cars. Leasing a Lamborghini, for example, is cheaper and more reasonable than buying it outright, especially if it is for occasional events. In this particular instance, leasing is used to improve social images affordably.
However, the landscape has been changing. Now, people are not leasing only luxury cars again; they are increasingly renting regulars cars, too. Sedans and small SUVs especially now experience a higher leasing rate than before.
Currently, brands such as GM, Hyundai, and Kia account for over 20% of all leased cars. This scenario confirms that more people now perceive car renting to be more advantageous than buying. The case for leasing over buying is strengthened by its lower monthly costs.
So, which is better? To buy a new car or to lease? The answer is tricky. Buying a vehicle outright eliminates the need for the monthly fees that come with auto leasing. Also, it enables you to own the car itself eventually. Additionally, with a bought car, you will never have a mileage limit, and you can choose to sell it any time you want.
However, generally, cars do not always make suitable investments. This is as a result of the rapid rate by which they lose equity. Once you drive off your new vehicle from the dealer’s lot, a substantial part of its worth is gone. It is estimated that cars depreciate by roughly 15% every year.
As a result, auto leasing is a viable alternative that is becoming increasingly popular. And even, in some situations, it makes more sense. But why has it become so popular? And when can it make sense for you, too? Now, find out.
To Buy or To Lease?
Business owners and executives lease cars because they can deduct vehicle costs. For them, deductible expenses include gasoline, repairs, registration fees, parking charges, and tolls, and insurance.
These costs, being tax-deductible, are paid as a part of their business expenses on which either no or lower tax is incurred. Leasing a car is preferable to outright buying if you are a business owner. It is cheaper. So, it will help you to maximize profits by cutting down on business costs.
Also, as a business owner, a more glamorous reason to go for auto leasing above buying is that you get to improve your company and personal image. By leasing, you get to be having different cars to drive from time to time. With that, your business can be enhanced, and more clients attracted.
If you are not a business owner, but you are someone who loves to change cars often, then auto leasing is for you. Leasing prevents permanent or long-term glue to vehicles and so, can help you keep up with car trends — your love! Therefore, you can decide to be leasing, and switching cars say every three years.
However, there is a caveat. To prevent penalties that come with breaking lease contracts before they expire, you should always ensure that the leasing arrangement you go for is flexible. Else, you should be based on your car use history, determine the specific number of years for which you will want to keep the car you lease.
Furthermore, if you live in a city with an efficient public transportation system, you may not need to buy a car. First, using such a public transportation system will be most likely cheaper than using a personal vehicle. Additionally, you will be able to do without expenses such as parking and maintenance fees and insurance when you lease instead of buying. As a result, in this instance, overall, auto leasing can be a more reasonable choice to make.
Before You Lease That Car
So, based on your situation and the evaluation of the benefits and drawbacks, you’ve decided to lease a car instead of buying. However, before you go ahead with your choice, you should be on the lookout for some hidden fees that can ultimately constitute a substantial financial burden for you.
Apart from the first deposit you make, individual administrative costs can also be incurred in the course of your auto lease application process. Additionally, you can incur a penalty when you decide to terminate your lease contract too prematurely. Therefore, you should get only a lease arrangement with a reasonable finance rate and no hidden costs.
Deciding between leasing and buying outright a car is always a tough choice. Both leasing and buying have their benefits and drawbacks, making a choice tricky. For example, while you get to own any car you buy outright, the rate of depreciation is high.
Then, with a leased car, you will not have to worry about extra fees and other allied costs apart from those required for the regular maintenance of the vehicle. However, on the other hand, buying cars outright does not give you the flexibility to use different cars from time to time that auto leasing does.
Otherwise, you are permanently stuck with the car you buy for a long time. Nevertheless, there are situations (e.g., if you are a business owner or you are living in a city with an efficient public transportation system) when auto leasing is a better choice. Still, before you decide, make sure to do your research.