When it comes to buying or leasing a car, the financial implications are important – but money is just one of several factors to be taken into account before you make up your mind. Your lifestyle and personal taste also play a vital role in your decision! Depending on your budget, goals and preferences, you will need to decide what matters to you most.
Before you begin looking for a car, take the time to consider what exactly you hope to get out of it. This means working out your budget and deciding on the terms you’d be comfortable with.
Read on to find out more about the benefits of buying and leasing.
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Benefits of buying
When you buy a car, you’ll pay less in the long run. Although lease payments are usually less per month than car loan repayments, when you buy the car, you’re building up equity for the future with each payment. This is handy if you decide to trade it in or sell it in the future.
When you buy the car, it’s a flexible arrangement that enables you to pay off the outstanding loan balance when you sell it. You can either sell it or trade it in, as it doesn’t lock you into a fixed ownership period as a leasing arrangement does.
There’s no mileage limit and you can drive as far as you want without worries, whereas with a lease, your mileage is usually capped and you’re charged a fee if you exceed this limit. When it’s your own car, you don’t have to worry about how it looks. You don’t need to keep it in pristine condition if you don’t have the time.
Around 20% to 40% of a car’s depreciation usually occurs within the first few years. This means that if you buy a two or three-year-old vehicle, you’re paying a price that takes into account the significant depreciation discount. When you sell it on, you’re unlikely to experience such a large loss.
Benefits of leasing
Leasing a car has its own benefits, not least of which is the monthly repayment cost: it’s generally cheaper per month to lease a car than it is to pay off a car loan. You won’t need to make a large down payment – with some agreements, you don’t have to pay any huge sum upfront.
On the flip side, however, if you’ve racked up the mileage in your leased vehicle, you’ll end up with the extra charge. Similarly, you may end up with additional costs for terminating the lease early or failing to repair any damage you may have caused.
Leasing a car means renting it for a fixed term – normally between one and four years. Your monthly payments will reflect the depreciation of the car that occurs during this term. If you’re buying a car on HP, your monthly payments will remain the same and depreciation isn’t taken into account. This is why some buyers find themselves still owing more than their car is actually worth if the value has depreciated significantly.
There will be fewer repair expenses when you’re covered by a manufacturer’s warranty during the term of your lease. You won’t need to worry about any large bills for unexpected faults. However, you may have to pay the costs of standard vehicle maintenance and pay for fully comprehensive insurance.
Leasing means you can change your car every few years and will benefit from having a vehicle with the latest technology and safety features. You won’t ever have the hassle of selling the car yourself, listing it online and putting up with time-wasters who either don’t turn up or try to haggle the price down.
Check whether the lease gives you the option of buying the car for a pre-set price at the end of the term. This can be a plus if the car is likely to be worth more than the agreed price at the end of the lease arrangement.
If you have bad credit, you may not be able to get a car loan. There are no such problems when you lease, as they are not normally as stringent as lenders. They can always take back the vehicle if you violate the lease by not making the payments.
Car leasing used to be hugely popular in the United States, but virtually unheard of in the UK, until a few years ago. It’s now becoming increasingly popular in Britain, as people want a new car more frequently. Consumers remain divided on which is the best option.
Do you have any recent experiences of buying or leasing a car? What’s your personal choice and have you had any regrets? Let other people know about your experiences by leaving a review on Psydro’s unique review platform.