Should I lease or buy a car? This is one of the most frequently asked questions when it comes to auto leasing. If you are the type of buyer who gives a name to your vehicle and hangs on to it well into its golden years-well past the point that the vehicle has been paid for; you need not concern yourself with a lease. However, if you’re the type of buyer that is always in the auto market every couple of years, then you should consider leasing.
However, it is necessary to understand what leasing entails as it could be a great option for your next vehicle purchase. Leasing is likened to rent in real estate. The leased car is still a property of the lessor (the manufacturer, or leasing company) and you simply make a monthly payment that represents the depreciation of the vehicle plus the leaser’s profit.
In today’s auto world, with the average cost of a new vehicle continually raising, it is now more important than ever to fully understand the options of vehicle leasing.
Benefits In Leasing A Car
- Lower Monthly Payments
When you secure a car on lease, you’re only required to pay the monthly premiums as payment for the vehicle’s depreciation. This simply means that the car leaseholder is just paying the premiums as the payment for using the car until the entire lease period is completed. No down payment or any upfront sales tax is required.
On the other hand, to purchase a vehicle, the buyer is required to make the appropriate down payment. The total payment provided throughout the entire lease period is almost equal to 50% of the actual value of the vehicle while financing requires the loan holder to pay the entire cost of the car. However, you might incur extra charges at the end of the leasing term for racking up mileage that exceeds the allowable limit, terminating a lease early, or having any unrepaired damage.
- Warranty and Maintenance Coverage
Most lease term has a manufacturer’s warranty; you do need not worry about the cost of repairs and maintenance. Your leasing company handles all the problems that may arise. The term of the lease for periodic maintenance gives you a low and predictable total cost of ownership, with few unexpected out-of-pocket expenses. However, irrespective of the lease term, you’re still responsible for regular upkeep and the minimum amount of auto insurance required by the state where you live.
- Driving A New Car With Advanced Features
Constant leasing of cars gives you a rare chance always to have a taste of a new ride. As its common with new rides, you get the benefit of driving a car with the most advanced tech features like top-notch infotainment system, advanced safety features like driver assistance technology, such as automatic emergency braking, adaptive cruise control, lane keep assist, and semi-autonomous driving systems and improved fuel economy ride (depending on the car model).
- No Need For Loan Approval
Quite unlike buying a car via car loan, leasing doesn’t need much bureaucratic process, stellar credit and strict terms before you will secure a lease deal because the vehicle can be taken back if you violate any leasing term.
- No Worries With Car Sales
At the end of the lease term, you return the car to your leasing company and might opt to lease another vehicle or even use your buy option at the lease term. However, you need not concern yourself with selling the car or getting a fair trade-in value.
- No Need For Sales Tax
Leasing a car can save you a huge amount of money in sales tax. Although this can be influenced by the laws in your area. When you purchase a car, you’re liable for sales tax on the whole purchase price.
The Downsides Of Car Leasing
- Restriction On Use
The disgusting thing about leasing a car is that it comes with several strict limitations on where you drive your car and what you can drive it for. Your car lease agreement may not allow you to drive the car out of the country; if you intend on doing such, you need to get permission from your leasing company. However, it is wise to go through your leasing agreement with your leasing company if you intend to extend beyond the conventional routine driving.
- No Ownership Right, Yet
Every leased vehicle is still the property of the leasing company. Leasing a car doesn’t automatically make you the car owner. The lessor grants you access to the car for some time and under some conditions as stipulated by the lease deal.
- The Strict Vehicle Maintenance Schedule
Although, your leasing company takes care of all the major repairs and maintenance expenses, however, you are required as from the lease agreement to carry out a strict maintenance schedule for the vehicle that they are leasing to you. The scheduled maintenance adheres to the set of procedures prescribed by the car manufacturers. Failure to strictly follow the scheduled maintenance procedures set by the leasing contract would require the leaseholder to pay some penalties by the end of the lease term.
- In Most Cases, You Must Purchase Gap Insurance
- Limited Car Mileage, You Pay Extra When You Exceed The Given Mileage
- Expensive Early Termination Fees
Benefits Of Buying A Car
- Full ownership of the car
- No mileage limit or nay restrictions
- Ability customize the vehicle to your taste
- No risk of possible lease-end charges
- Option to sell it
The Downside Of Buying A Car
- More Expensive in the Short Term
- Need to make a down payment
- High fee on sales tax
- More loan than your car is worth
- Once the warranty runs out, you’ll be solely responsible for repair costs
In conclusion, the decision to lease or buy a car is all personal. It’s just like deciding between going for a mortgage and renting a house. A thorough self-examination will help you decide. Your creditworthiness and style of living will also come to play.
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