Leasing vs. Buying

Today, many people are wondering if leasing or purchasing is the best when it comes to new cars. Both leasing and buying have wonderful advantages as well as their own disadvantages.

No matter if you plan to lease or purchase you will be more than likely making monthly payments. Leasing does give you a bit of relief in that your payments will be lower than if you were purchasing, however, you will never own the car. If you purchase, your monthly payment will be higher, but you will own the car after all your payments are complete.

You may hear that leasing is better by some of your family or friends and then you will hear some that buying is better. Before you make your own decision, you should learn the similarities and difference of both options.

When you decide to purchase a car, most people have to apply for a loan. Not too many people have enough cash lying around to pay for a brand new car; therefore, they apply for a loan. The loan consists of two charges, the principal charge and the finance charge. The principal charge is the total value of the car and the finance charge is the interest that is placed on the loan. You should shop around and find the best possible interest rate before applying for a car loan; you may find that you can receive lower monthly payment through your own bank than with the car dealership.

Remember, when you are making monthly payments to purchase a car, the car is yours as long as your make your payment. You can travel any place you would like to go and make any additions that you would like to your car or other customizations. It is your car unless you default on the loan and then the car can be repossessed by the loan company that gave you the loan to purchase the car.

There are a couple of disadvantages to purchasing a new car. Your monthly payment will be higher than leasing, is the number one disadvantage and the other is that you will have to sell the car if you do not want the car any longer.

When leasing a car you will have to make monthly payments that consist of two charges, a depreciation charge and a finance charge. The depreciation charge is the price that the car has gone down in price while you were using the car, this will give the dealership compensation for the depreciation value that you used. The finance charge is of course the interest that you are paying on the term of the lease.

When you lease a car, you will never become owner of the car. You cannot make any additions or customizations to the car. You cannot sell the car or trade it in if you get tired of it. If you decide to take it back and the lease is not up, you will have stiff penalties to pay. You will also not be able to go any place you like. When you are leasing a car, you are given a certain amount of miles that you are allowed to drive during the term of your lease. If you go over the amount of miles specified then you will have to pay for every mile that you go over the original amount.

The short-term advantages of leasing are of course the fact that the monthly lease payment is quite a bit cheaper than monthly payments for purchasing. A matter of fact the payments are between 30 to 60 percent lower than most loan payments.

However when it comes to long-term advantages purchasing wins hands down, if you do not plan on keeping the leased car after the term of the lease. If you plan on returning the car at the end of the term of the lease and leasing another car, of course, you will end up paying more in the long run. You will own your car after you have paid off your loan, however, with a leased car you will have to lease another one and another one compared to driving the same owned car over the same amount of time.

Making this decision is a personal one and if you prefer to drive a new car quite often, then leasing will give you this chance even if you will never own the car. You can always sport around in a brand new car.