Whether it’s your first car or not, investing in a vehicle is a huge decision to make. It’s also a difficult one, considering all the purchasing options available. The most common question that buyers ask is, “Should I lease or should I buy?” Whether you choose one from the other, each of the options has advantages and disadvantages. If you choose to buy a car, whether through a loan or with cash, you get the ownership to it and you can sell it or donate it later on. With leasing, on the other hand, you can get a new car every few years and won’t have to go through all the hassle of selling it. All you need to do is hand over the car to the dealer at the end of the term and acquire a new lease if you want to. To give you a better idea, here are questions to ask yourself.
What’s Your Monthly Cash Flow?
Leasing a car has obviously lower monthly payments compared to loaning one. With a lease, you’re not paying for the whole vehicle cost, but instead the depreciation of the car during the years of the term. If you do not have enough monthly cash flow, leasing may be the better option for you.
Do You Have Available Money For Down Payment?
Most lease contracts offer low down payment. The dealer may even waive it for you and let you pay less for the sales tax as well. And since it has lower down payment, it won’t have a significant impact on your cash balance and budget. With buying, on the other hand, the down payment can be twice as high.
How Much Do You Drive?
Some leasing companies charge an up to 20 cents per mile for additional miles. If you drive over 10,000, you’ll probably have to pay additional for each mile. However, there are companies that will let you pay less per mile if you decide to buy them upfront, that is, as you are negotiating the lease. In numbers, that’s going to look like this: If you drove 3,000 miles over the agreement, at 20 cents a mile, that would be $600 worth of penalty. Moreover, if you drive a lot, you’ll put the car at risk of getting scratches and other damages. That, too, could add up to the cost, since leasing companies usually ask for wear-and-tear fees.
How Long Do You Plan To Keep The Car?
This is one of the biggest considerations. If you only want to keep the car for a few years, then leasing would be the most convenient option. Be sure to stick with the terms of the lease, however, as you will pay a lot if you get out before the term ends. More importantly, research on how does car leasing work. If you plan to keep the car for a very long time, then you should opt for buying.
Again, there are pros and cons to either buying or leasing a car. Overall, it makes sense to opt for either, but that depends on your financial capacity, how you plan to use the car, and how long you plan to keep it.