Leasing vs Buying: Why Car Leasing Makes Sense in this Economy
Depending on who you ask and what your priorities are behind having a car, leasing a vehicle can either be the best or the worst method for a person in the market to get a car of their own (for a couple of years during their lease agreement, anyway…). Our article will break down the difference between leasing and owning a car and demonstrate why leasing may be the right next step for you as a car owner.
Buckle up; you’re in for a ride!
Leasing vs Buying: What is the Difference?
Leasing a vehicle is similar to renting one in that you sign a contract to lease a vehicle that allows you to “rent” the car for a certain period of time. Most leases are 24-36 months long, while some may be longer, depending on your circumstance. The contracts for these lease agreements typically outline the mileage limits and limitations on what kinds of modifications are acceptable to make to the car and what fees to expect along the way. After the lease period ends, drivers can either return the vehicle to the dealer/lessor or buy it from them for a predetermined amount.
Purchasing a car, on the other hand, means that the title of the vehicle is yours once you sign the papers. With control over mileage, modifications, and whether or not you can trade, sell, or keep the vehicle yourself – you maintain control over all aspects of your new vehicle. It is yours, anyway. Most car purchases are not in cash but through a car loan. This means that buyers pay a down payment in addition to a monthly repayment that tackles the principal and interest incurred from buying their car.
Benefits of Leasing a Car
There are many benefits to leasing a vehicle instead of purchasing one outright. For starters, the monthly payments on a leased vehicle are typically lower than on a car loan when you buy a car, and you don’t have to worry about interest. Although most lease agreements require some kind of fee upfront, they are almost always less than a car down payment.
Leasing vehicles on limited contracts, most being 24-36 months long, also means that you can realistically get a new car every few years. To some, this is a big factor that draws people in, while to others, driving a new, shiny car every couple of years isn’t a selling point. There are many different dealers and car leasing specialists that can help you find the right car for you, whatever season you may be in. Whether you want a luxury vehicle or a new car with more utility, you can drive in style at a lower cost.
Lessees are also on the easy end of car ownership when it comes to the long game. When you lease vehicles, you do not have to worry about reselling the car once your contract ends. You simply return the car to the dealer and pay any loose-end termination-of-lease fees that may be outstanding. The lessor is responsible for any long-term next steps, like signing a new contract or selling the car afterwards.
Many new cars also have a 3+ years warranty with the dealership. If you take out a 24-36 month lease contract on a new car, most repairs or maintenance fees needed during your lease should be covered. This leaves you in a great place in terms of avoiding pesky maintenance expenses.
With how rapidly cars depreciate once they are taken off the forecourt and considered “used” instead of “new,” it is a stressful time to be a car owner considering selling or trading in their vehicle somewhere down the line. Leasing a car completely negates this upside-down investment.
Needless to say, there are many benefits to taking the next step in leasing a vehicle, especially in today’s economy.
Drawbacks to Leasing a Car
Although leasing a vehicle in this economy is a great money move for some, it does come with a few drawbacks that could apply to consumers. Due to the fact that you do not own the vehicle but are only renting it, you do not have control over things like how many miles you can drive, if you want to sell or trade your vehicle in, or what kinds of modifications you’d like to enhance your car’s performance.
In addition to monthly payments, lessees are subject to paying other fees that can add up. Some of the more common fees that lessees run into are lease initiation, early termination, excess mileage, and wear-and-tear fees. Although these combined may be less than buying a car straight from the dealership, in the long run, leasing a vehicle may be more expensive than buying one at some point. Depending on your insurance policy and its coverage, you may also need to add gap insurance to your lease agreement to help cover any accidents that your own insurance does not cover.
Leasing a vehicle ultimately comes down to your needs and desires as an individual. Factors like your budget, lifestyle, and driving needs play into whether or not leasing is for you and what type of car is a good fit for you to lease. Especially for drivers that expect to drive less than 25,000 km per year, leasing could be one of the best investments you ever make.