This is the traditional and most common way of getting a new vehicle. After you pay off the loan, you are the owner of it. Before that, the lender is the one who holds the title. Loans usually come from banks, credit unions, and finance companies. Don’t forget to do your research well and inquire about the financing options not only at your bank but at other lending agencies as well. The length of an auto loan is called its term. It’s common knowledge among experts that you should avoid getting a loan that lasts for more than five years.
This is a type of auto financing that allows you to rent the vehicle for the future. You are not paying the full price like when you are buying it, so that’s why it’s much less expensive. What you are paying for is the amount of depreciation that will occur during the lease (plus interest and fees). At the end of the lease, you will return the car to the dealership or buy out your lease if that’s an option. Keep in mind that you usually need good credit to lease a new one. If you don’t have good credit, the lease could be expensive. But even if you do have bad credit, there are some ways to increase your chances of getting approved nevertheless.
If you’re scratching your head right now and trying to realize what’s the better option, we’re hoping we will help you come up with an informed decision. There are pros and cons to both options. Money definitely isn’t the only implication you should take into consideration. It’s also up to you and your goals, budget, personal preferences, and lifestyle. You need to determine which advantages cater more to you since, unfortunately, there’s no one-size-fits-all option. We will list the reasons for both leasing and buying your car. You can take a look and decide what option is the right one for you.
Some of the pros of leasing a car are as follows:
• Lower monthly payments
As we’ve already mentioned, the cost to leas it is usually much lower than to buy one. Keep in mind that you could have extra charges for mileage or any unrepaired damage when you return the vehicle.
• Latest Model
If you opt for purchasing a used car instead of leasing, you might get an older car with outdated technology. It’s different when you lease vehicles every few years – you’ll drive a higher-tech and more expensive model.
• Warranty Protection
You’ll be covered by the warranty through the lease term (typically three years). But if you damage the vehicle, you’re responsible for paying for those repairs.
• Saving On Sales Tax
When you purchase a car, you need to pay sales tax on the entire price of the vehicle. This is not the case when you decide to lease it. In some places, you only have to pay sales tax on the amount of your down payment. The laws are different from state to state, so you should check that with a professional.
Some of the cons of leasing a car:
• Mileage restrictions
There are pretty much always strict mileage limits. If you exceed them, this can prove to be costly. You should have a good idea of the number of miles you drive annualy before you consider this option.
• You don’t own the car
This is a big difference when comparing leasing to purchasing a car. The leasing company is the one that owns the vehicle. It’s their rules that you have to follow.
• You can’t modify it
Usually, you cannot change the car in any way, and you have to return it in the same condition.
You are the owner of the car. You can do whatever you want with it whenever you feel like it. This sense of freedom is something a lot of people deem to be priceless.
• No mileage restrictions
No mileage limits means that you can drive as much as you’d like to. This is the option that makes a lot more sense if you drive a lot of miles.
• It’s easier than leasing
Consumers are usually more familiar with the process of purchasing a car rather than leasing it. The credit card requirements are also lower for a loan than for a lease, which is something that makes this option available to a bigger number of people.
• You can sell it
When you are ready for a new car, you can sell this one at an excellent price.
• No additional charges when the loan is paid off
You don’t have to worry about any additional charges once the final payment is made.
• More expensive in the short term
If you really lack the means at the moment, buying a car is probably not the option for you.
• You’ll pay much more in sales tax
The amount of sales tax is usually based on the price of the vehicle.
• You don’t know its future value
You really cannot predict what the car’s cost will be once you are ready for a new purchase. New vehicles can lose up to twenty percent of their value as soon as you start driving them.
Determining whether you should buy or lease a car depends on many factors. You need to think about your finances, driving habits, personal preferences, etc. Once you know all the factors, you can sit down and compare both sides to determine your next move. Good luck!