Benefits of car leasing vs outright purchase

It’s the common dilemma that faces every auto consumer at some point – pay cash in advance or forego the ownership and pay monthly instalments instead. Purchasing or hiring a new set of wheels should be researched before making a decision.

As is the case with every other common dilemma, there is no slam-dunk answer. Each option has its own advantages and drawbacks it really all depends on a set of financial and personal considerations.

First your finances. Affordability is clearly key. A question that needs to be asked is how stable your job is and how healthy your general financial situation is. The short-term monthly-cost of hiring is significantly lower than the monthly payments when buying: you only pay for the portion of the vehicle’s cost that’s used during the time you drive it.

If you pay a larger amount of cash in advance, then you can opt to pay the down payment, sales taxes in cash or rolled up into a loan with the interest rate determined by your loan company. Buying effectively gives you ownership of the car and that feeling of “free driving” that goes on providing transportation.

If, for example you would like a luxury model but can’t afford the upfront cash of purchasing the vehicle than you’re a good candidate for leasing. Unlike buying, it gives you the option of not having to pay the down payment in advance, leaving you to pay a lower amount that is generally similar to the interest rate on a financing loan. However, these benefits have a price: terminating a lease early or defaulting on your monthly lease payments will result in stiff financial penalties and can ruin your credit.

You need to make sure you stipulate the monthly lease payment in your budget for the foreseeable future, at least for the duration of the lease. Besides the financial aspect, making a buy or lease decision depends on your own particular lifestyle choices and preferences. Think about what the car means to you: are you the sort of person to bond with the car or would you rather have the excitement of something new? If you want to drive a car for more than fives years, negotiate carefully and buy the car you like. If, on the other hand, you don’t like the idea of ownership and prefer to drive a new car every two to three years then you should lease.

The next important factor is your transportation needs: How many miles do you drive a year? How well do you maintain your cars? If you answer is that you drive 50,000 miles a year and don’t really care much about the cars as you don’t mind dealing with repair bills, then you’re most likely better off buying. Leasing is based on the assumption that you have limited-mileage, usually no more than 12,000 to 15,000 miles annually, as well as wear-and-tear considerations.

Unless you can keep within the prescribed mileage limits and keep the car in good condition, at the end of your leasing period, you might incur hefty end-of-lease costs, but all of these terms and conditions can vary from leasing company to leasing company as well as country of residence. Doing thorough research on Purchasing vs Leasing a Car before deciding on whether vehicle hire is right for you, will always help you make the right decision to suit your needs.

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