Understand the lease contract and car loan terms before deciding on one.
Understand the lease contract and car loan terms before deciding on one.

Cars are considered as important part of American life. There are two options of owning a car- car leasing or buying. Leases are short term and in the long term, buying a car is less expensive. When you ask most people whether it is better to lease a car or purchase a new car, they will suggest buying as an ideal way to go. Well, if you consider it from the financial perspective, it is true but you need to be ready to make high monthly payment and pay off the loan in full to keep ownership of the car. However, leasing is a less expensive option and it is ideal for someone who enjoys driving a new car every few years or so.

There is no correct answer, each scenario is different and there are pros and cons of both the situations. When you have to take a decision to lease or buy, it will come down to your lifestyle and how you like to pay for things. 

Car leasing and car buying have their pros and cons you need to consider.
Car leasing and car buying have their pros and cons you need to consider.

If you need a premium car for your business, leasing is a good option as it will allow you to have a quality car at less money. And if you are someone who sticks with the same car for many years, it is best to buy and keep it for as long as it is reliable. The point of buying a car is to enjoy a couple of years without a car payment and this is something a lot of people forget. Since each situation is different, let us consider some pros and cons of buying and leasing a car. 

Car leasing

A car lease is a contract where a party will permit another party to a vehicle for a specific period of time in exchange for regular payments or monthly installments. Some contracts carry an option to purchase the car at the end of the period. You can either purchase the car or turn it back over to the lessor. 

Pros of leasing

  • You can enjoy low down payment and have low monthly payments.
  • Leasing will allow you to drive any car of your choice for low investment.
  • The repair cost is low because you will be covered under the factory warranty of the vehicle. 
  • It is easy to move to a new car every couple of years.
  • You will pay less sales tax
  • You will not have trade in hassles at the end of lease contract. 

Cons of leasing

  • You will not have the ownership of the car at the end of lease period but there is an option to buy.
  • The mileage will be limited to 10,000 to 12,000 miles a year in most cases.
  • The lease contract might be confusing and have complex terminology.
  • You will pay more in the long run for a leased car than you will incase you buy a car. 
  • You might face heavy wear and tear charges at the end of the lease.
  • It can be expensive and tedious to terminate a lease before time if your driving needs change.

Car buying

When you decide to buy a car, every payment will go towards owning the car right away. The car loan term will range between 4 to 6 years and once you have paid the entire amount, you are free to do whatever you want to with the car. If you take good care of the car, its resale value can help you recoup the expenses.

Pros of buying

  • It is possible to modify the car as you please.
  • When you purchase a car, it will save money in the long term
  • It is possible to drive the car as much as you like and there is no excess penalty.
  • You are free to sell the car whenever you feel like.
  • The car can be used as a trade-in for the next car you purchase. 

Cons of buying

  • You will have to make a higher down payment
  • The monthly car expenses will be higher than the lease payment.
  • The responsibility of the car is yours and you will have to pay for repairs after the warranty expires.
  • You will face trade-in or selling hassles if you decide to get another car.
  • Your cash will be tied up in the car, which will depreciate in value in the long term. 

There is no right answer to car leasing or buying. Many prefer to buy a car while there are many others who consider leasing as an ideal option. The major difference between the options is that at the end of the payment term, you will own the car if you have bought it and in case of leasing, you will not have the ownership of the car. In the end, it all comes down to your personal choice and preferences. It is up to you to consider the pros and cons and decide which is best suitable for your lifestyle. 

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