When you must decide whether to finance or lease a car, you have considerations that can seem overwhelming.

Last year, people bought 17.2 million cars. Do you want to drive a new car this year? Do you wonder the best way to buy one that fits your budget and lifestyle?

Whether you decide to finance or lease a car, you have decisions to make that could seem overwhelming.

Questions to Consider

There is no one-size-fits-all option when you decide whether to lease or buy. Before you begin, consider these factors:

Do you have good credit?

If you’re short on cash but have good credit, a lease can help maximize your cash flow. You won’t dump a lot of money into a large down payment and related sales taxes with a lease. With excellent credit, you can get a lease for no money down with lower payments than buying.

How far do you drive?

You’re only allowed a set number of miles during your lease. If you drive further, you pay a large mileage fee. You can buy extra miles up front, but if you drive a lot of miles each year, a purchase may be the better option.

How do you use your vehicle?

If you use your car for business and want to impress clients, a lease could be the better choice. You may even be able to write off your payments as a tax deduction. Ask your accountant.

Are unending payments OK?

Leasing can be less expensive in the short term with lower monthly and down payments. You pay the depreciation of your car during the first year. If you lease, you always have a car payment – you don’t “pay off” your loan.

Leasing Benefits

Let’s check out some of the benefits and perks of leasing.

Drive a nicer vehicle

Since you have more budget space in a lease, you can often get a nicer vehicle. You may also be able to get those upgrades you want.

Less expensive

You typically have lower monthly payments with a lease compared to a purchase. That’s because you only pay depreciation, not the entire vehicle’s cost.

No sale or trade-ins

When your vehicle lease ends, you drop off the car to the dealership and get a new one. You don’t worry about selling or trading in your old car for a new one.

Downside of Leasing

There are some negatives to leasing. You need to figure in these factors.

Costs of wear and tear

You need to return your leased vehicle in its original condition. You may face extra charges especially if you have pets or children. You will have to pay for anything that’s broken, stained or needs repair.

You also have to prove your car is up-to-date on maintenance. Have your dealership do the maintenance if it’s cost-effective. Regardless, keep a complete record with receipts.

You’re out the money paid

The money you used for the down payment, monthly payments and extra fees is “out of pocket.” You don’t get any “return on investment” with a lease.

Leases have mileage limits

You have mileage restrictions with a lease. Standard leases average 12,000 per year. You must stay within that amount or you pay over-mileage fees. Such fees are usually about $.20 per mile or $200 per 1,000 miles driven. You should calculate how many miles you drive each year before you lease.

You need excellent credit

You need to have strong credit to lease a vehicle. If your credit isn’t exceptional, a purchase is probably a better option. It’s easier to get approved for an auto loan than for a lease.

Buying Benefits

You may not drive the latest model, but there are some great reasons you should consider buying a vehicle instead of leasing it.

You’ll own the vehicle

The biggest benefit is you “own” the vehicle. Once your loan is paid off, you no longer have a car payment. You don’t have to worry about mileage, wear and tear, and early turn-in fees. The “return on investment” is your wholly owned vehicle.

Don’t need extra insurance

Whether you lease or buy, you need auto insurance. But a lease requires extra insurance set by the lease company. If you buy and payoff the loan, you decide the amount of insurance you want or need for your vehicle, subject to state regulation.

You can sell your vehicle

Unlike a lease, you can get some money back. You can sell your vehicle, pay off the loan and keep any extra profit.

Credit checks are easier

If you have less than excellent credit, you can still qualify for auto financing. There is less risk since you own the vehicle versus the dealership taking the vehicle back once the lease ends.

Downside of Buying

There are some negatives to purchasing a vehicle.

Higher monthly payments

Since you are finance more money with a car loan, monthly payments are higher. You pay the entire cost of the vehicle. A larger down payment lowers that amount.

You’re stuck with your choice

If you want to drive something new, you have to sell the vehicle for enough to pay off your auto loan. When you buy, plan to keep that vehicle for a while, which means you may miss out on new technology.

Your vehicle depreciates

You lose money as soon as you drive your new car off the lot. The first mile you put on that car lowers its value significantly. It’s the difference between a “new” car and a “used” one. That’s why you need to keep your vehicle for a while if you buy.

Should You Lease or Buy?

When you decide whether to lease or buy a vehicle, consider the points we made here. You need to do what’s right for you, your budget and your lifestyle.

Ready for that new car? Contact us today to find your dream vehicle – whether you buy or lease it.

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