Deciding Whether to Lease or Purchase Your Next Car

Deciding Whether to Lease or Purchase Your Next Car

1996 GM EV1 Electric Vehicle 013 N

1996 GM EV1 Electric Vehicle 013 N (Photo credit: Corvair Owner)

Most people in the market for a personal vehicle don’t even consider the prospect of leasing. If they can afford it they’ll purchase a new car, and if they can’t they’ll look at certified pre-owned models or even older, used cars as an alternative. But leasing can offer many benefits to the driver in need of a personal vehicle, especially when strapped for cash. So why is it that most people never look into leasing? In truth, there is a certain stigma attached to renting personal possessions rather than purchasing them outright. And there are all kinds of myths about leasing that are unflattering, to say the least. But as a consumer it’s in your best interest to look into all of your options so that you can make an informed decision, and this is especially important with a big-ticket item like a car. So here are just a few things to consider before you decide to buy or lease a vehicle.

The first and most pertinent aspect of this proposition for most people is the cost. And you might be surprised to learn that you could end up saving a lot of money by leasing. For one thing, the monthly payments on a lease are nearly always less (and often significantly less) than a purchase. This is because buyers are expected to pay off the entire sticker price of the vehicle they purchase within five years (or less), plus interest payments on a loan (and any extras tacked on to the overall bill). Lease payments, on the other hand, are calculated to account for the amount of depreciation that will occur during the time you have the car (generally 2-3 years). Since the dealership can still sell the car after you return it, they lose nothing by offering you low monthly payments.

In addition, should you opt to purchase the vehicle at the termination of your lease contract, you’ll end up paying significantly less than if you had purchased it outright, the reason being that you’re taking a loan for a lot less money than the cost of a brand new vehicle, meaning you’ll pay far less in interest. If you purchase a new car for say, $30,000, you’ll end up paying a lot more interest than on the $20,000 you still owe at the end of the lease (at which point you’ll apply for an auto loan for the remainder). And you may still be eligible to enjoy tax deductions throughout.

Of course, there can also be a downside to leasing. You’ll have to carry full coverage insurance for the duration of the lease (although you’ll also be on the hook for such a policy as long as the bank holds the title to a purchased vehicle). And if you exceed your mileage limits or cause damage to the car while you’re leasing it, you could face fees when you turn it in (since these flaws further depreciate the value). In addition, you’ll be on the hook for massive penalties should you try to get out of your lease early, an addendum that many people fear since they cannot sell a vehicle should they have to forfeit on the arrangement (although there are ways to sell a lease to a party interested in riding it out). So there are pros and cons to both buying and leasing options, and whether you’re searching for vehicles to buy or perusing websites that offer car leasing UK to Ukraine, just keep an open mind and explore your many options.

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