Should You Buy or Lease Your New Vehicle? (Infographic)
All car buyers have the option to either purchase or lease their vehicle, and both options have their respective benefits. The purchase or lease decision depends mostly on the buyer’s budget, goals, and personal preferences. The buyer’s budget plays a significant role in the decision-making process because many car buyers will likely consider the leasing option, as noted by MarketWatch that the percentage of buyers who chose to lease increased from 31% in 2019 to 52% in 2020. Leasing is an option to drive away with a new car at a more affordable upfront cost than most costs when purchasing it unless the buyer manages to get the car without paying for any down payment.
First-time car buyers might opt for a lease since they won’t have to take a car loan. A loan’s monthly payment tend to cost more than a lease’s monthly payment unless the car buyer pays a large down payment for a loan. Some people might lease their new vehicle when they can’t afford a loan while forgetting to consider that they no longer own the car after the lease term.
It is essential to know the benefits of purchasing and leasing to see which option is suitable for the buyer when looking for California’s best car deals to avoid confusion between them.
Benefits of Buying a Car
It is possible to purchase a vehicle by paying by cash or by financing it. The buyer takes ownership of the title once the purchase price or loan is paid in full.
Lower Payments in the Long Term
Often monthly lease payments are less expensive than the monthly car loan payments that buyers have to pay. The only time that a monthly car loan payment is less expensive than a monthly lease payment is when the car buyer puts down a huge downpayment. A car loan’s total cost is also lower than that of a lease since the new car owner won’t worry about any increase in the price due to exceeding mileage limits.
No Limit in Mileage
If the buyer needs a car for long-distance travel and wants to drive as many miles as possible, it’s better to buy a car instead of leasing it. As mentioned above, there are mileage limits when leasing a vehicle, and exceeding them can result in higher expenses. A standard auto lease typically comes with 10,000 to 15,000 annual mileage limits, but there are also lease terms with 18,000 to 20,000 mileage limits. Lease terms with higher mileage limits cost more than standard lease terms since the car buyers have a chance to drive further without worrying about over-the-limit fees.
Buying a car frees the buyer from mileage limit restrictions and allows for maximum use of the car, even on long road trips.
Customizing a car allows buyers to “own” the car and tailor it according to their needs. A customized car can have aesthetic improvements, better performance, and/or added protection, depending on the owner’s preference. One way for the car to have better performance is to change its stock tires with better ones.
Owning the Car After the Loan
Owning the car you spent may seem like a no-brainer, but it remains an important point. After the buyers pay off their car loan, they own the vehicle. Owning a car allows the buyer to increase its value through proper customization and maintenance and sell it, especially if the car in question are classics and hard-to-find cars. The buyer will have an asset that can be used for years to come.
If the car is leased, the car is lost unless the leaser decides to buy it, which may be the wrong decision if it is worth less than the pre-set price.
Benefits of Leasing a Car
If a person cannot afford to purchase a new car or only need a vehicle for a set period, another option is leasing the car. The leaser won’t own the car after the lease term is over.
Low Monthly Payments
A lease is attractive for many people due to the low monthly payments they need to pay compared to a car loan. The leasee also doesn’t have to pay any upfront sales tax in most states, as the tax is included in the monthly lease payment. The lower costs per month are attractive since not everyone can afford the high costs of a loan’s interest costs or pay immediately in cash.
The only way for the leasee to have extra charges is to exceed the allowable mileage limit, terminate a lease early, or return a damaged vehicle.
Never Going Upside-Down
Leasing a car means renting it for a fixed term, with the payment being tied to the car’s price, the expected amount of depreciation during the lease term, and the residual value after the lease term. The leaser only needs to pay for the car’s depreciation during the duration of the lease term. A leasee won’t owe more than the car’s value or go upside-down when leasing the car.
Most people who take a loan to purchase a new car end up going upside-down as their vehicle depreciates.
Lesser Repair Costs
People who leased their vehicles won’t have to worry about paying for large and unexpected repair bills if a manufacturer warranty covers them during the lease term. Despite the lower repair cost, there are still the regular upkeep, maintenance, and minimum auto insurance required by the state where the leaser lives.
Driving a New Car More Often
Any changes in the leaser’s circumstances might require a new car to meet the new needs. Someone might need a particular vehicle for only two years for a job assignment or possibly need a bigger vehicle in a few years. A lease can help people get a car they need without buying one and potentially ending up with a car they won’t need in a few years.
Not Needing to Worry About Resale
Once a lease term expires, the buyer will only have to return the vehicle to the dealership or lease a new car. The buyer doesn’t need to sell the car once the term ends, so there are no worries about looking to get a fair trade-in value for the vehicle.