To lease, or not to lease? Purchase a car, or not to purchase a car? These are the questions that we should be asking ourselves when deciding how we are going to start our new car search. Both are great options. However, depending on your lifestyle, what your needs are, how you drive, etc., comparing whether you should lease or buy becomes a lot easier.
Lease a Vehicle
Simply put, a lease allows you to drive a new vehicle without having to pay a large amount of money or taking out a loan to afford it. The basic steps of leasing a vehicle is putting a small down payment towards the car, which is typically less than the typical 20% of the vehicle’s value you would pay if you had bought it. This is then followed by monthly payments for the term of the lease where you will finally return the vehicle when the lease term expires.
- Does leasing a vehicle make sense for you and your lifestyle? If you believe it does, leasing a car may be more beneficial than purchasing if you:
- Don’t have the cash to purchase or finance the car your like.
- Don’t typically put high mileage on your vehicle to begin with (between 10,000 and 15,000 miles per year).
- Can take maintain the car’s interior and exterior. You make sure to avoid nicks, spills, and other cosmetic damage to the vehicle.
- You expect to lease another car after your current contract terminates.
Drawback to Leasing a Vehicle
Like all good things, there are a few drawbacks to leasing a car. Leasing is not for everyone, and it is very important to do your research ahead of time and know exactly what you are getting yourself into when it comes to leasing a vehicle. Some drawbacks to leasing a car include:
- Penalties can be steep when leasing a car.
- You go beyond your contracted number of miles in your lease contract.
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If you go beyond the contracted mileage, you should expect to pay anywhere from 10 to 15 cents per mile.
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The interior and exterior of the car were not maintained to be warranted good condition.
- Your dealer will access the vehicle for any damages to the car just before the lease expiration date, so that you are aware of what will be charged (if any).
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The car was driven hard and has significant wear and tear on the car which hindered its performance and overall appearance.
- You do not own the vehicle once the lease expires. Additionally, you don not build equity in the vehicle to use towards the potential purchase of your next car.
Purchasing a Car
Finding the perfect new car can be a very exciting process. Knowledge is king when it comes to finding your next car. And with a plethora of information a mouse-click away, the internet makes it easy and stress-free. Unlike leasing a vehicle, when purchasing a new car, or new-to-you car, you own it! You can build equity in the vehicle towards the purchase of the next car, you can customize it with all kinds of accessories, and drive it the way you want.
With purchasing a new vehicle, you have a couple of questions that you need to answer for yourself:
Will you be purchasing new or a used car?
New cars offer the latest and greatest in innovation and technological advances. However, they come with a much higher price tag than if you were to look at a lightly used car. With new cars, you can expect to find either cash or finance offers from the cars manufacturer which can help lower how much you will end up owing over the lifetime of your loan, or the upfront price tag of the vehicle.
If a used car, will it be a certified pre-owned (CPO) car, or a non-certified pre-owned car?
Because a car is a depreciable asset; savvy car buyers tend to look at CPO vehicles as their first choice before they even think of looking at a new car. Certified Pre-Owned cars meet a strict multi-point inspection set by the cars manufacturer in order to qualify to be labeled as a CPO vehicle. Additionally, they must next exceed a certain number of miles on their odometer in order to qualify. CPO vehicles come with a discounted price as they are lightly used cars, but still maintain their original performance and appearance compared to their brand-new counterparts.
Will you be financing or purchasing entirely in cash?
Knowing your budget, and how you plan on purchasing your new vehicle is crucial. Again, because vehicles are a depreciable asset, the best way to purchase a car is entirely in cash so that you don’t have to finance a dime and then owe more than what the car is actually worth over the life of your loan. However, if this isn’t an option for you, try and put as much as you can reasonably put down in order to defray the monthly payment amount.