The Difference Between Buying vs. Leasing

Buying or leasing?

What should you choose?

overview

Everything in life comes with the requirement to make decisions. We make decisions every day in our lives from what we wear to whether you want to add guac to that or not. This feeds into our shopping as well, and it is even more important when shopping for a new car. The first decision that you need to make before even deciding between a sedan, SUV or truck is whether you want to finance or lease your next vehicle. What you choose to do is something that you need to consider based on your financial situation, and goals! We have put together everything you need to know on the pros and cons of leasing versus financing and vice versa.

pros of leasing

For starters, leasing a vehicle can be described as renting a vehicle for a very long period. What you end up paying for instead of the vehicle is the amount that the vehicle will depreciate during the lease term in addition to interest and fees. What you benefit from leasing a vehicle is that you’ll often receive a monthly payment that’s lower than the payment on a loan. Another benefit is that some leases usually but not always require a down payment to lease a vehicle. Another sweet perk to leasing a vehicle is that you always upgrade every few years to a newer car with all the latest tech and features. Your leased car will also be covered with its OEM warranty and trading the car in is so much easier than a normal trade in. You’ll skip all the negotiating considering the value of the car should be straightforward. Lastly, you will be happy to hear that you may also save some extra money on sales tax if you choose to lease your car!

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Cons of Leasing

Now that we have covered the benefits, let’s discuss the disadvantages. There are a few downsides to leasing a vehicle, it’s not a decision for everyone. Let’s get into what these drawbacks are before you sign on the dotted line and lock yourself into a multi-year contract. The first on our list of disadvantages is that when you lease, at the end of the term you don’t own the vehicle. You are also always stuck making a car payment and have a mileage limit. So, if you have an extremely long commute or go on road trips every other weekend then this is probably not the option for you. If you’re a gear head who loves to customize their ride, then this is also not the option for you given that you can’t customize the vehicle. If you need to service the vehicle, you’re often limited to only being able to take it to the dealership where the vehicle was leased. The vehicle must also be returned in the same condition it was leased. If you have kids who love to have fun in the backseat then you may want to reconsider financing instead. Another caveat to leasing is that you’re often required to have good credit. Whereas financing has a lot more flexibility for customers with good and bad credit.

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pros of financing

This seems like a better time than ever to transition into the perks of financing a vehicle. Buying a car outright is what most customers are used to doing when they walk into a dealership. One of the primary and obvious benefits to financing your vehicle versus leasing is that when you’ve reached the end of the loan period the vehicle is owned by you. When you are the owner of your own vehicle, you also have the choice to drive the vehicle as much as you want, wherever you want, given that there are no mileage limitations. With the financing of a vehicle, you also have the option to make your monthly payment even lower with a big down payment. When you are sick of the car you finance you can trade it in whenever you want and even receive money back if it’s worth more than when you bought it. Going this route also allows you to not have a car payment once the loan is completely paid off and if the car breaks down you choose whether you want to get it fixed. Above all, because it’s yours, you can keep that car clean or super dirty if you choose to!

cons of financing

Most customers who go the route of financing their next vehicle are often not aware of the drawbacks that come with financing a vehicle. We can tell you with absolute certainty that if you only choose to have a vehicle for a short period of time, then you may be looking at spending more if you finance. Another downside to financing a vehicle is being subject to interest rates that vary based on many external factors. In addition to paying interest on a vehicle, you are also subject to paying sales taxes on the vehicle. While putting down a large down payment on the car is not required, it is recommended as it will help with the equity of your vehicle. In addition to that, you also will never be able to guess the value of your vehicle in the future if you ever choose to sell it or trade it back into a dealership. The last downside to financing a vehicle is that you’re limited with the warranty that comes with the vehicle directly from the manufacturer. Every vehicle comes with a different manufacturer warranty, and the only way to ensure additional warranty on your vehicle is if you pay for the extended warranty, which is then more money out of your pocket!

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Final verdict

At the end of the day there isn’t a right or wrong answer when choosing between leasing or financing a vehicle. In the short term, a lease will typically be more cost effective than financing a vehicle that will be more cost effective in the long run. Owning a vehicle may in fact provide you with some beneficial equity that can help with the purchase of a vehicle in the future. All in all, we recommend you do your due diligence and decide that best fits your financial needs, automotive requirements and plans. Your next vehicle should be one that will maintain it’s value, stay reliable during its lifetime and give you the gas mileage you need.