Lease Vs Buy

Leasing Versus Buying a car – pros and cons
Leasing a car or buying a car is similar in many ways, but there are advantages and disadvantages to both scenarios. In both cases there are monthly payments, and car depreciation and possible repairs involved. The best way to determine which situation is best for you is to look at your financial situation and your family situation.

Leasing

Leasing cars usually involves little to no repairs, refundable security deposits, no down payments, and a lower monthly payment. The lessee does not have to stick with that one vehicle forever he can change vehicles every two to four years, or purchase the vehicle. The lessee also pays only a portion of the vehicle cost because it is a pay what you use situation. The sales tax the lessee pays is based on monthly payments only. The lessee usually pays a charge that includes the depreciation amount and the finance charge only. With leasing there is a Gap Coverage that is usually included in the agreement this allows for the insurance to pay the difference between what is owed and what the car is worth. This can save the lessee lot of money if they decide to buy the car at the end of the lease.

Buying Cars

When a car is purchased it is usually attained with a loan. A down payment is usually required and the payments are much higher than a leased vehicle. There are periodic repair cost. But at the end of the payments the buyer owns the vehicle all though it is very much depreciated by that time and this does decrease the resale value or trade in value of the car. Gap coverage is not usually a part of the buying process like with leasing. The one thing with buying a car is that it does not get more expensive as time goes on like with leasing, the longer you keep the lease the more it cost. When you buy you can customize the car to increase its value.

Example of a Lease versus Buy Deal

A $20,000 car has a resale value of $13,000 after about two years , with a lease purchase you can buy the car for the difference at $7,000. But if you buy the same car for $20,000, you will pay that amount plus the finance charges and all the fees. Another example is say you want a car that cost $23,000 and the lessee and the buyer both put down $1,000 at 6%interest the lessee will end up paying a monthly fee of $388, while the buyer will end up paying about $669 every month, that is a huge difference. The buyer ends up paying almost 30% more than the lessee person. This is due to the residual fee deduction in the leasing situation.

Summary

There are advantages and disadvantages to both leasing and buying, the best way to decide what is right for you is to look at your family unit, is there just you or is there a spouse and children, do you need a car that will eventually be yours and you pay up front a little more but save in the long run. Or do you want to be the jet setter and change cars every few years. It all depends on what your finances look like and what you want out of a vehicle. If you don’t care about ownership and you like having a new car frequently than leasing may be for you. If you want to own your car after a few years than buying is for you. Each individual has to decide what is going on in their life at that specific moment and things change a lessee may become a buyer and visa versa. It depends on the economy and the buying market and the leasing deals available at the time.