Riding around on a fresh set of wheels is a dream we all have. Before you can show off your new ride however, you need to decide how you will pay for your car. Below is a post explaining the pros and cons of leasing or buying a new vehicle.
Should you lease or buy your next car? There is no right answer to this question. It all depends on your needs, your budget, your vehicle choices and your driving habits.
If you’re considering long-term savings, then buying and owning a car for seven to 10 years is the best option. Consider:
- You can drive it for as many miles as you want.
- Your level of upkeep is entirely up to you.
- You will build equity in the vehicle, which means you can sell it for cash or use it as a trade-in to lower the price of your next purchase.
- You’ll save money in the long run and establish good credit as long as you are on time with your payments.
On the downside, your upfront costs — sales taxes and dealer fees — are higher, and you’re responsible for all maintenance.
If you’re more concerned with comfort and short-term savings, leasing is attractive because:
- You can drive a nicer car than you might be able to afford to buy.
- You can trade for a newer model every two or three years.
- You have a low, or even no, down payment.
- Your monthly payment is generally less than taking out a loan for a new car, because you’re only paying off the depreciation of the vehicle and not its full value.
- You have tax advantages, if you use the leased car for business.
- You’re not stuck with an old buggy when it’s time to sell or trade up.
Ah, but there are drawbacks to leasing, as well:
- You will always have to make a payment because, unlike a loan, a lease is never paid off.
- You will likely pay a penalty if you want out of your lease agreement before its term is up.
- The dealer will charge you extra if you exceed the lease’s mileage agreement — usually 10,000-15,000 miles per year.
- You will have to pay for any damage to the vehicle beyond normal wear and tear.
- You have no equity in the car, which you would accrue if you bought a car.
So, the decision is yours. You’ve got to consider a host of variables and then figure out what makes the most sense. And if your brain starts to explode — you can always take the bus.
Jon Robinson is a Consumer Financial Advocate for Debt.org – America’s Debt Help Organization
