There is no right or wrong answer when it comes to deciding between leasing or buying a vehicle. Rather, there are several factors that need to be considered when making this important decision, such as the upfront costs, your monthly payment budget, and how many miles you typically travel. This significant decision truly depends on your personal financial situation and lifestyle needs. If you’re trying to decide which vehicle option is best for you, keep reading for a thorough look at the differences between leasing and buying a car.
Leasing a Vehicle
Leasing a vehicle is like renting a car for a specific agreed-upon period of time. Rather than paying for the full purchase price of the car, truck, or SUV, you will be making monthly payments during the term of the lease that will cover the costs of depreciation.
Leasing a vehicle typically includes the following: making a down payment, signing an agreement anywhere from two to four years, and financing through a dealership.
Benefits of Leasing a Vehicle
While “renting a vehicle” may not seem like it has its benefits, there are certainly a number of compelling reasons to consider leasing.
Lower Monthly Payments
Because you’re only paying for the cost of the vehicle’s depreciation, monthly lease payments are typically much less than monthly auto loan payments.
Newer or Luxury Models
With a lower monthly lease payment, often you can drive a newer or luxury model vehicle for the same price as a regular model.
Warranty Protection
When you lease a vehicle, the factory warranty will cover any mechanical repair that is not due to accident, abuse, or normal wear and tear, typically during the first three years of the lease agreement or 36,000 miles.
Modern Technology
Because you are receiving a new vehicle every two to four years, you will always have access to the latest transportation technology.
Ease of Trade-In
No worry about trading in or selling your used vehicle. At the end of your lease agreement, you simply return the car to the dealership and begin a new lease agreement if you wish.
Drawbacks of Leasing a Vehicle
Just as there are benefits to leasing a vehicle, there are also a number of drawbacks.
Mileage Restrictions
There are restrictions on the number of miles you can drive your leased vehicle. If you go over the amount listed in the lease agreement, you will have to pay extra fees at the end of the lease agreement.
Monthly Payments
When leasing a vehicle, you will always have a monthly vehicle payment.
No Customization
Some car owners enjoy customizing their vehicles, but with a lease, this is strictly limited. The vehicle must be returned in the same condition as it left the lot, with reasonable wear and tear of course.
Binding Contract
A lease agreement is a binding contract. If this contract is broken before the end of the agreement, you could be facing some pretty expensive charges and fees.
No Cash Value
When returning your leased vehicle to the dealership at the end of the contract, there is zero cash value in it for you. There is absolutely no return on investment for the monthly payments you made for the last two to four years.
Buying a Vehicle
When you purchase a vehicle, you become the owner of that vehicle until you decide to sell it or trade it in for a newer car. There are several options for buying a vehicle that depends on your personal financial situation, your monthly budget and expenses, and whether you want to own a car long- or short-term. The cost of a vehicle is extremely varied, especially if you compare a brand-new vehicle to a pre-owned model.
Most car owners need to apply and qualify for a vehicle loan with a bank or auto financing company before buying a car. However, once this loan is paid off, the car is then officially yours.
Benefits of Buying a Vehicle
Buying a vehicle includes several benefits such as the ones listed below.
No Mileage Limits
When you purchase a vehicle, either by cash or loan, the vehicle is yours and you can drive it wherever and whenever you’d like. There are absolutely no restrictions on mileage.
Own the Vehicle
You have the ability to own the vehicle outright by paying cash for the car or once the vehicle loan is paid off.
Sell Anytime
When you buy a vehicle, you have the right to sell it or trade it in at any time.
Vehicle Equity
Although cars do depreciate over time, there is a return on your investment in the form of vehicle equity. The equity depends on the age and condition of the vehicle.
Customizable Options
Even if you are paying on a vehicle loan, auto financing companies and banks allow you to customize the vehicle any way you wish. There are no restrictions on what you can add to your personal vehicle.
Drawbacks of Buying a Vehicle
There downsides to buying a vehicle just as there are advantages to it. Let’s take a closer look at these drawbacks below.
Higher Monthly Payment
Loan payments are usually higher than lease payments because you’re paying off the entire purchase price of the vehicle, plus interest and other finance charges, taxes, and fees.
Limited Warranty Protection
Some vehicles include a limited warranty that typically ends before the vehicle loan is paid off. If there is no warranty included, you have the option of purchasing one, but it will be an extra fee on top of the monthly payments you are already making.
Higher Upfront Costs
When you purchase a vehicle rather than lease, you have to pay sales tax on the entire value of the car. It’s also in your best interest to make a larger down payment in order to lower your monthly payments.
Should I Buy or Lease a Car?
Now that you understand what is involved in buying and leasing a car, including the benefits and drawbacks of both, which do you think is best for your personal financial situation? If you’re still unsure which direction is best for you, contact a member of our sales team at Huffines Hyundai Plano. We are more than happy to help you make the right decision for your specific financial situation and for the needs of your family.
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