If you need a car to get around, as most Americans do, you have a few ways of obtaining one. The average new vehicle sells for about $32,000, while used vehicles sell for an average of $20,000. We can’t recommend stealing a car, because that just never turns out well – plus, it’s illegal. This leaves us with three options: cash, lease, or finance. Considering how much cars are worth, most car buyers aren’t considering the “cash” option, so they’re left with an age-old question: to buy a car or lease a car. About 30% of cars are leased, and they’re not all business-owners looking to write off the expenses on their taxes. Should you lease or buy your next car? Here are a couple of considerations.
The Benefits of Buying a Car
When you buy a car, whether you finance or pay with cash, you own the vehicle when you’ve paid it down to the last penny. Owning a car, you are free to do with it as you please. You can drive it across the country, modify it to your heart’s content, replace the tires and sell it or trade it when you decide to get another vehicle. Considering the average car is pushing 12 years old, regular maintenance and prompt repairs will let you enjoy your car long after you’ve made the last car payments.
Still, buying a car, especially if you finance, can be a pitfall. The down payment and car payments are almost always higher than lease payments, for the simple reason that you are buying a whole car, not just leasing the use of a car. If you have in mind a certain model and features you like, you may have to settle for less car to afford the payments. If you’re buying a new car, depreciation will take a significant chunk off the value of the car, which reduces its value if you decide you’d like to trade it back in or sell it. In other words, make sure you’re in it for the long haul.
The Benefits of Leasing a Car
Leasing a car is an attractive option because it enables you to drive more car – better features, more safety technology – than if you finance it. If you have a certain model in mind, you might be able to upgrade features and pay less than outright buying. Because you’re basically renting the car, down payment and lease payments are much more affordable, and you get to drive a new car every few years.
On the other hand, leasing a car means you never really own the car. To avoid end-of-lease fees, you have to stay within the mileage limits, usually 12,000 or 15,000 miles per year, and keep the car in good repair. Another drawback is never-ending car payments and typically-higher insurance premiums. Perhaps the best of both worlds, though, is the open-end lease, which is less-restrictive, for your agreement to buy the car at the end of the lease period.
Are you looking at buying a car or leasing a car? You might find it interesting that you can even lease used cars, which can really widen your automotive horizons. Whichever financial path you choose, do your research, not only of what car you’d like to drive, but also how well it fits in your budget.