Leasing vs. Buying a Car: Which is the best option for you?
Cars are one of the largest investments that most people make, and a purchase that big deserves careful consideration. Before committing to a payment plan, it's a good idea to understand your financing options and determine whether you're making the best choice for your finances and needs.
One option that is often overlooked by car buyers is leasing. While it's true that leasing a vehicle does have some drawbacks, it can also make a lot of financial sense for the right driver.
How is Leasing Different from Owning?
Buying a car is fairly straightforward: The ownership of the car is transferred to you in exchange for a predetermined price. When you finance the car, a bank buys it for you, and you pay back that loan plus interest in monthly installments.
When you lease a vehicle, you make monthly payments the same as you would when buying. However, you won't own the car; you are expected to give it back at the end of the lease agreement period. The price of your lease is based on the difference between the car's value today and its expected value at the end of the lease period.
Leasing works because cars depreciate in value very quickly. By taking advantage of this, the dealership can get more money from the first few years of a car's life, and you can benefit from lower monthly payments.
Is Leasing Right for You?
A major advantage to leasing a vehicle is that the monthly payments will be much lower than if you were financing. Because you're only making payments on the depreciation cost of the vehicle, you can expect to pay quite a bit less. This may allow you to drive a newer or nicer car than you could otherwise afford. However, you will need to take very good care of the vehicle as you will be held liable for any damages it has when the time comes to return it.
The biggest downside to leasing is that you won't have any equity in the car. This means that you won't be able to use that car for a future trade-in, and you will not own the vehicle. On the other hand, leasing prevents you from experiencing the negative equity associated with a car loan that exceeds its value.
From a financial standpoint, it's often best to buy a slightly used car. This will allow you to build equity, and a car that's a few years old will face less depreciation than a new one off the lot. However, if your career or lifestyle demands that you always have the newest model of vehicle, leasing can be a more affordable way to ensure you're always in a new car.
Because leasing and financing options will vary depending on your personal finances, you should be sure to discuss your options with the dealership. Whitesides will be happy to review your credit and help you to make the right choice for your needs. Contact us today for more information!