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New Cars: To Lease or Not to Lease?

Buying a new automobile is one of the most important purchases you will make in your lifetime. And let's face it, owning a vehicle is necessary for most to get to work and the kids to school. So while the decision to buy a vehicle seems like a no-brainer, deciding how to finance it may not be as clear. Do you lease, or do you buy?
Pros of Leasing
When you lease new cars, payments are typically cheaper and there is often a low down payment, if any. Monthly payments are also much smaller because you are paying for the future depreciation of the vehicle and not the full sale price. Additionally, a portion of the depreciation and financing costs can be deducted from your taxes.
Maintenance costs virtually nothing because warranties on new cars typically last about three years - the same as an average leasing period. Lessees also enjoy the latest technology and safety features since you can trade in your car at the end of your lease for another brand new one.
Cons of Leasing
There are many restrictions when leasing. Since the vehicle is technically not yours, you cannot make any alterations to the interior or exterior. Likewise, there are mileage restrictions, usually ranging from 12,000 to 15,000 miles per year. If there are additional miles on your vehicle when you turn it in at the end of the lease, you are required to pay a fee, which is typically $0.20 per mile. Additionally, you can accrue extra fees for excessive wear and tear to the vehicle (think about kids and pets). Also, ending the lease early could result in more hefty penalties.
Taking out a lease is a lot like taking out a loan. You must have good credit, and you will be paying interest on the money you borrow for the car. Interest rates for lessees are often very high because the lessor is accounting for gap insurance. Gap insurance is necessary in the event that your leased car is stolen or totaled, since the original lease insurance only covers the face value. Finally, the lessor earns interest off the money you are paying, so you will not build any equity in this situation.
Pros of Buying
Unlike leasing, purchasing means you actually own the automobile when your loan is paid off. In this way, you are building equity. Once you own the vehicle, you can sell it at any time. Additionally, you can make any alterations you like, and you can drive it as much as you want since there are no mileage restrictions. Insurance costs are typically lower as well because there is no gap insurance to consider.
Cons of Buying
Unfortunately, new cars start to depreciate as soon as you drive them off the lot. It is often difficult to determine what your car will be worth when you want to sell it due to the constantly diminishing resale value. Unlike leasing, purchasing often requires a large down payment and higher monthly payments because you are paying the entire purchase price. Finally, any repairs are on your dollar, especially when outside the warranty period.
When considering new cars, Clinton Township, MI residents can visit http://www.dorianford.com/Clinton-Township-MI/For-Sale/New.

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