Wondering Whether to Lease?

The end of the year is fast approaching bringing with it newly released car models. These shiny new releases might have some of us thinking about trading in our old vehicle for a brand new model. When it comes to purchasing a vehicle however, there are several options for you to consider. So before you decide to buy or lease you next set of wheels find out which option is the best financial fit for you.

Leasing a vehicle basically means that you are borrowing the vehicle from a company for a certain amount of time. When your lease is up, you are then given the option to buy the car or turn it back in. According to the Federal Reserve Board, most leases run anywhere from 2-4 years.

When leasing, you may be responsible for your first month’s payment, a security deposit, taxes, registration, and a capitalized reduction. According to leaseguide.com, “capitalized reduction” or “cap cost reduction” is any down payment or trade-in that decreases the amount being financed.    

In contrast, when purchasing your vehicle, you will be responsible for your down payment, taxes and registration.

Leases are more appealing to some because your monthly payment is typically lower than what you might be paying if you were purchasing the vehicle. Still, paying a little more every month could pay off big in the long run.

If you decide to forego the lease route and purchase your vehicle, you can look forward to the day when you give your last car payment, boosting your equity and lowering your monthly expenses. Owning your own vehicle gives you the freedom to drive as many miles as you’d like or customize it to fit your preferences.  

On the other hand, leasing a vehicle significantly affects your freedom to do what you’d like with your car. Remember that because it is a lease, you are essentially borrowing the vehicle for 2-4 years. Leasing companies usually have strict standards as to how they’d like their vehicle returned.

When leasing, you will be given a limit as to the number of miles you are allowed to drive, exceeding this limit can mean paying costly fees. Additionally, leasing a vehicle means you don’t have the freedom to personalize your car, such as tinting your windows because it must be returned in like new condition. Many leases hold you responsible for excessive wear and tear. You can also count on having a car payment until you decide to get out of the lease cycle and make the commitment to purchase a car.

In short, remember that when determining whether to buy or to lease, consider how long you plan to keep your vehicle, how many miles you drive per year and whether or not you plan on customizing your new car.

The bottom line: consider leasing if you typically keep a vehicle for 2-3 years anyway, if you don’t drive long distances and if you don’t have any or little money for upfront costs. Otherwise, purchasing a vehicle could be the smarter route. It will save you a significant amount of money if you choose to keep your vehicle long after you give your last monthly payment.

 

Do you prefer to purchase or lease you vehicle? Please share your thoughts in our comments, we would love to read them!