Back in the day, leasing a vehicle was reserved for corporate customers, or people looking for a luxury car. Today, leasing is as common a part of the car industry as buying. Paying cash or getting a vehicle loan are not the only choices you have for getting a new car. So, how do you know which is right for you?
First, you need to learn more about leasing versus buying and the important details of each. Then you’ll be able to determine which is best for your needs when you start looking for the best vehicle prices at the dealership.
Benefits to Leasing
Some of the benefits to leasing are:
- You always have the newest model vehicle.
- You still have an option to buy at the end of your lease terms.
- There is no long-term commitment. Lease terms are usually about 3 years.
- Monthly lease payments are lower than buying.
- Great if you only have a small down payment for the new car.
- Keeps your costs predictable.
When you purchase a car, you’re taking out a loan based on the cost of the vehicle minus your down-payment and trade-in value (if you had one). When you lease, however, you’re just financing the depreciation that will happen to the vehicle during the lease terms, plus fees. When the lease term is over, you can simply return the vehicle to the dealership.
Downsides to Leasing
Of course, there are always downsides and some of the cons to leasing are:
- There are restrictions to the number of miles you can drive and going over can cost you penalties.
- You can’t make significant alterations to the vehicle. You need to return it in factory condition, less expected wear and tear.
- At the end of your lease terms, you have no equity in the car (unless you decide to buy out your lease).
- Usually you need good credit to qualify for a lease (or a co-signer with good credit).
If you want to keep your car for a long time, buying may be a better option. Ask upfront if you have the option to buy out your lease. If not, then you may want to consider buying instead of taking a lease.