When you’re shopping around for the car of your dreams, it’s easy to get stuck in the debate between leasing or buying it instead.
While both options have their pros and cons, leasing will likely save you more money upfront than buying but could end up costing you more money down the road.
Here are some tips on how to determine whether or not leasing or buying a car will better fit your budget, lifestyle, and goals as a driver.
What is leasing?
If you own a car, at some point in time you will end up selling it to get a new one. So if you never keep your car forever, why not just rent one…
When leasing, you are essentially renting a car for a long time. You’ll make monthly payments for a defined period (usually three years), after which you can decide to buy the vehicle. The biggest benefit to leasing is that it allows you to get into a new car every few years without breaking the bank.
What’s the difference between leasing and financing?
When you lease, you are renting the car. So you don’t own the car. When you finance the car, you are taking a loan to help you buy the vehicle.
Pros of leasing a car:
Buying a car is a lot of money, so leasing can help you reduce the bill.
Here is how the finance of buying or financing a car works.
Let’s say you buy a car for $17,000. After 3 years you decide to sell for $12,000. The overall cost of the car is $17,000 – $12,000 = $5,000 for 3 years, right?
The idea of leasing is that you only finance the $5,000 so you don’t have to pay a large sum of money. Even if you compare leasing to financing, there is a big difference. Because if you finance, you will be financing $17,000 over 3 years whereas if you are leasing you will be financing $5,000 over 3 years.
Leasing is an easy way to drive a new car regularly as it allows you to change your vehicle regularly without the hassle of having to sell the vehicle.
Cons of leasing a car:
You don’t own the car so you cant modify it. You need to get the car thoroughly maintained to avoid any issues at the termination.
Also, in the long run, leasing is more expensive than buying even though it requires you to spend less cash upfront.