Some of us choose to purchase our cars and some of us prefer to lease them. The question is which is best choice to take, car leasing or car buying?
Look upon a vehicle lease as a long term rental. You do not own the vehicle and at the end of the lease you will then return it and pay any end of lease cost that is due, to complete your contract.
In contrast when you buy a vehicle and pay with a loan, the car is still your property at the end of the loan period. If you then wish to purchase a new vehicle it’s up to you to trade in or sell the old one.
Most new cars will lose their value as soon as you drive it out of the sales room! It also depreciates with age and as the mileage is bigger.
Lease payments will cover just the portion of the cars value that you use during the time you drive it, the depreciation and not its complete cost. Finance charges are added on to your payment.
When purchasing a car with a loan you are liable for paying its full cost, plus finance charges. Depending on your deposit or trade in value of another vehicle, this can obviously result in higher payments than for a lease, even if you get a long term loan.
At the end of the lease you may be liable to pay excess mileage fees. A maximum number of miles are stipulated that you can drive during the lease period. It is usually company policy that you would repay a charge per mile for every mile driven over that limit. However, you can often buy extra mileage at the beginning of the contract at a cheaper rate than you would pay for the extra mileage at the end!
As regards damage to the car, the leasing company would naturally expect some reasonable wear and tear. However the vehicle will be inspected for any damage or excessive wear and tear when it is returned at the end of the lease.
A fee would also have to be paid should you choose to finish a car or van lease early.
The car lease company does not take responsibility for the maintenance of the car during the contract period. You will be responsible for the costs of looking after the vehicle, just as if you owned it.
Warranty repairs will be honoured no matter who owns the vehicle. Usually you will find that lease terms end before a vehicle goes out of warranty.
The best way to get an idea as to the deal that would suit you best is to work out how much you are actually prepared to pay to own a vehicle. Add up all the payments you would make on the car, then compare that to the value when the payments cease. Owning a car does not usually make money unless maybe when buying a classic car.
So, is it best to lease or buy?
Leasing:
A car lease might be best if you need a new car every two to three years.
It would be preferable to drive a new vehicle but cannot afford to buy one.
On average you drive 15,000 miles or less each year.
You would not be using the vehicle in such a way that it would cause excessive wear and tear.
You are not in a position to make a large down payment.
You use the vehicle for business and can write off your car lease expenses.
Buying:
You plan to pay off the car and keep it to avoid loan payments.
You are in a position to pay for repairs after the warranty period has passed
You put more than 15,000 miles a year on a car
You have credit issues, sometimes when this is the case it will be easier to buy than to lease
You may intend to trade it in for another car in less than two years
