Should You Buy or Lease A Car?
It’s a dilemma that faces every auto buyer out there: Should you pay cash upfront or simply pay monthly lease settlements instead? Buy or lease for a new set of wheels?
Like most tricky questions there is no correct answer since each option has its own benefits and drawbacks, and it all depends on your situation and financial position.
First, consider your finances. Afford ability is clearly key, and you need to ask the question of how stable your job is and how healthy your general financial situation is. The short-term monthly-cost of leasing is significantly lower than the monthly payments when buying: you only pay for “the portion” of the vehicle’s cost that you use up during the time you drive it.
If you have a lot of cash available for the upfront down payment, then you can opt to pay the down payment, sales taxes – in cash or rolled into a loan – and the interest rate determined by your loan company. Buying gives you ownership of the car and that feeling of “free driving” that goes on providing transportation.
If, say, you want to get into luxury models but can’t afford the upfront cash of purchasing the vehicle then you’re a good candidate for leasing. Unlike buying, it gives you the option of not having to fork out the down payment upfront (or a much smaller one), leaving you to pay a lower money factor that is generally similar to the interest rate on a financing loan. However, these benefits have a price: terminating a lease early or defaulting on your monthly lease payments will result in stiff financial penalties and can ruin your credit. You need to make sure you carve out the monthly lease payment in your budget for the foreseeable future, at least for the duration of the lease.
Besides the financial aspect, making a buy or lease decision depends on your own particular lifestyle choices and preferences. Think about what the car means to you: are you the sort of person to bond with the car or would you rather have the excitement of something new? If you want to drive a car for more than fives years, negotiate carefully and buy the car you like.
If, on the other hand, you don’t like the idea of ownership, and prefer to drive a new car every two to three years then, you should lease. Next, factor your transportation needs: How many miles do you drive a year? How properly do you maintain your cars? If you answer is: “I drive 40,000 miles a year, and I don’t really care much about my cars as I don’t mind dealing with repair bills”, then you’re probably better off buying.
Leasing is based on the assumption of limited-mileage, usually no more than 12,000 to 15,000 miles a year, and wear-and-tear considerations. Unless you can keep within the prescribed mileage limits and keep the car in a good condition at the end of your lease, you might incur hefty end-of-lease costs.
When You Lease A Car What About Auto Insurance and Leasing
When leasing a car, it’s easier and very tempting to stick with the same company for your
auto insurance. However, what you may not even realize is you may end up
paying too much for your coverage. You will be paying a price for convenience and it’s often better to look elsewhere for lower rates.
Leasing a car is a bit different from buying one. When you lease, the vehicle that you will drive still belongs to the leasing company. Under the lease contract, it will always belong to them. They want to make sure that their investment is covered in the event the vehicle gets damaged, totaled or stolen. They typically want the vehicle covered for the difference between what your auto-insurer pays and your outstanding lease obligation at the time of the accident or damage. This is called GAP, short for Guaranteed Auto Protection, and is usually included in the leasing contract. Be sure to ask if you are writing your insurance with the leasing company.
If your leasing company is called BMW Financial Services, Chrysler Financial or any other finance division of an automaker, then chances are your GAP insurance will be offered by the same lease company.
You are under no obligation to accept the GAP insurance included as part of
your lease agreement. Why pay an insurance premium if you could get the
same coverage for a lower price?
Invest some time shopping and compare quotes from other insurance
companies, including your existing one. Ask for discounts that you already
qualify for and adjust your coverage accordingly.
Related posts:
- The Leasing Manual – We Uncover The Several Types Of Car Leasing Available
- Reduce Fleet Car Overheads With Car Leasing
- Traveling Around The World On Loans And With Auto Insurance
- How To Find Low Cost Auto Insurance
- Free Auto Insurance Quotes To Find A Great Deal on Car Insurance
