Most of us can’t just pay cash for a new car, so financing is a major consideration. Another option is leasing a new car. Although the decision is a very personal one we will break down the pros and cons of buying vs leasing a new car.
Leasing a car, the benefits
Leasing is very similar to financing in many way but there are some key differences. By leasing you may be able to get more bang for your buck. The reason for this is because financing a car is based on the full price of the new car while leasing is based on a percentage of the car’s price. An example of this is if you are looking at a $30,000 car you would finance the entire $30,000. Payments would be based on the entire $30,000. With a leased vehicle you only pay the difference between the car’s price and what it is expected to be valued at the end of the lease. This is the car’s residual value. What this means to you is if he residual value is 55 percent after three years that means the $30,000 car would now be worth $16,500 at the end of the lease. You would make lease payments on the remaining $13,500 and not the full $30,000!
The Drawbacks of Leasing a Car
There are of course drawbacks to leasing. Leasing contracts limits the number of miles you can drive. Typically restrictions are 9,000, 12,000 and 15,000 a year. So it is important to determine your driving needs prior to committing to a lease. Overage charges can be very expensive so it is important to calculate accurately!
Leased vehicles are not able to be altered. You can make minor changes that can be reversed but for the most part that is not an option.
Benefits of Buying a Car
If you like to have your vehicle for a long period of time leasing is not for you. When you buy you own the car when the loan is paid off. When the car is paid off you own it completely and all the equity in the vehicle is yours. One of the biggest benefits is there are no millage restrictions. If you drive a lot buying is probably a better fit for you.
Drawbacks of Buying a Car
When buying a car it’s a crap shoot with the resale value. It’s hard to determine what the vehicle will be worth when you are ready to trade in or sell. Another drawback is down payment of the purchase of a new vehicle as well as the monthly payment. Purchasing the vehicle is based on full value of the car so payments will be higher with a higher down payment.
As you can see there are a lot of variables when considering leased vs buying a car. Do your homework, know your driving habits and understand what is required of both leasing and purchasing a car. Knowledge is power so educate yourself to make the best decision for you!
ICC Collision Centers hopes everyone has a safe and worry free Weekend !!