Is Leasing a Car Better Than Buying?
By Space Coast Daily // July 9, 2021
Buying a new set of wheels is always a monumental event in everyone’s life. However, a lot of it can be a stressful ordeal as well, for a car enthusiast. The painstakingly long financing processes involved with buying a car can kill the interest in driving a new car home.
Today, car buyers face another dilemma while selecting their favorite set of wheels- whether to buy or lease a car. In automotive terminology, leasing is an independent buying process wherein the interested individual can use any preferred vehicle for a predetermined period of time in exchange for timely payment of rentals. The individual doesn’t have full ownership over the leased car. At the end of the leasing period, the individual has to return the car to its original owner.
Today, leasing is one of the best car buying processes for customers, especially for those who want to cut down on the maintenance and depreciation costs of a car. By leasing a car, the user only has to pay the additional maintenance costs included in the lease agreement.
For example, if there is a used Chevy Malibu for sale in your nearby locality, leasing it is a much better option to avail the full benefits of its ongoing warranty and avoid any excessive expenses for big repairs or maintenance. Before you jump to a conclusion, tune in to our article to understand the various factors associated with leasing a car.
A] Buying a car
The most straightforward way to obtain the car of your dreams is simply by buying it. This process involves approaching a car dealership or private dealer, and paying the amount in cash, or taking out a loan to cover the car’s expenses. As simple as it sounds, there are a lot of factors associated with the regular car-buying process, including its share of pros and cons.
Buying a new or used car gives you the ultimate satisfaction of actually having full ownership of your prized possession. Once you complete the payments, the car is yours to take it out on the streets. You also have the complete freedom of selling your car whenever you wish.
Buying also means that you aren’t bound by any limitations on your car’s ownership period. Insurance premiums are also typically lower than a leased car. Furthermore, you can take your car to faraway destinations, without any restrictions on mileage.
Purchasing a car has its share of drawbacks, with the most common one being a higher cost on monthly payments. Also while purchasing, dealers require a reasonable down payment while booking your car, which is already a substantial amount of money out of your pocket.
Similarly, when you pay out your car’s loan, your car’s value takes a severe hit owing to depreciation. Thus, after a certain period of time, the car turns out to be of much lesser value than the portion of the loan remaining to be paid at the buyer’s end.
As your car depreciates dramatically, your monthly payments go more towards interest rather than the principal, leaving you with little equity at the end of your car loan.
B] Leasing a car
Leasing is a pretty new process for most newbie car buyers out there. This process at times can feel very confusing and primarily targeted more towards the business owners or individuals who cannot afford a full payment of a car.
However, in reality, there are more benefits to leasing a car than you can imagine and this applies to all individuals regardless of their career or income.
Types of leasing:
In this type of lease, the individual can part with his car at the end of the deal. Additionally, you have to incur all the extra costs for the additional mileage traveled by you and any excessive wear and tear on the car.
Generally, this is the safest option for college students or freelancers who can’t afford a standalone car.
This type of lease states that the individual must purchase the car for a predetermined amount at the end of the deal. This type of lease is generally favored by businessmen or other individuals who spend their whole day driving. This type of lease is also referred to as an equity lease.
The greatest benefit in leasing a car definitely has to be the lower costs that you have to pay initially to get your hands on the car. There is little to no down payment involved and you only have to worry about paying your monthly rental fees on time. Leasing grants you the satisfaction of driving a new car every few years.
A leased car is offered on rent only for a fixed period of time, typically 36 months or 48 months. You only have to shell out the depreciation of the car for that fixed period of time, instead of the full depreciation of the car. Leasing a car also grants you various task advantages especially if you are planning to use the vehicle for business purposes.
Leasing is basically considered as renting a car within a specified period of time. If owning a car in the long term is an actual ambition in your life, leasing may not be the best decision for you. However, with an open-end lease, you have the option of financing the remaining value of the car on your own means. Thus, you still can be a proud car owner at the end of a lease deal.
The biggest challenge involved with leasing a car includes the stringent limitations on your driving mileage. It is important to specify the correct mileage restriction before you end up signing an agreement. Usually, most lease deals cover up to 15,000 miles per year.
If you end up exceeding that limit, you have to shell out between 10 to 25 cents for every additional mile traveled. This penalty may end up burning a hole in your pocket, especially if you have a knack for traveling long distances. Insurance premiums are also somewhat higher for leased vehicles.
C] Know the difference
■ Leasing is basically renting a car from a party for a specified period of time
■ Buying a car means that you are the sole owner of your car with no limits on your ownership period
■ Leasing a car is much more pocket-friendly as the monthly payments are generally more affordable
■ Owning a car grants you the opportunity to build up some equity by paying out your car loan, although depreciation hits very hard
■ Leasing a car has various stringent conditions on mileage and preserving the car’s condition
■ Buying a car grants you the freedom to rack up mileage on your odometer as per your incline
Our final words
Leasing a car in its prime years can also tend to be a costly affair similar to buying a car. The amount that you pay for the lease is calculated as the difference between the car’s purchase value and the residual value.
Residual value stands for the value of the car at the end of the lease period. So it is much wiser to pick a humble car that retains its value very well rather than a flashy car that has a high depreciation value. Crafty dealers may try to push most of the depreciation costs onto you.
Also, before you sign on the dotted line, be sure to check out all the extra clauses in the agreement, including the additional costs for wear and tear and mileage. You certainly don’t want to be paying a large bill at the end of your lease deal owing to your negligence. On a final note, leasing allows you to experience various cars, thus fulfilling your ideals of a true car enthusiast.