In the market for a new car? You have the option to buy or lease a vehicle, but may be wondering which direction you should take. To decide which arrangement best suits your needs, start by evaluating what each alternative has to offer.
Leasing a Car
There are a number of reasons why you may want to lease your next vehicle.
If you own your own business, you may be able to write off the monthly payments of a lease as a business expense, but only if the vehicle is solely used for business purposes. However, be careful because if you use your vehicle for personal and business use, limitations apply.
If you are in a service-oriented industry, like consulting, you may be required to chauffeur around clients on occasion. Assuming the car you currently own is not in the best shape, a leased ride may offer clients a better perception of you and your entity.
Prefer Newer or High-End Models
Ultimately, leasing grants you more bang for your buck, at least during the duration of the agreement, because the down-payment and monthly payment are usually much lower than if you were to purchase the car outright. If you are not in a financial position to qualify for the latest models with all the bells and whistles, but want a newer ride, leasing may be the way to go.
In terms of major repairs, most leased vehicles are covered under factory warranty should a mechanical breakdown occur. However, you will still be responsible for other operational costs, such as normal wear and tear, registration and insurance. However, you should thoroughly review your lease agreement to confirm.
Assuming you stay within all the parameters of the contract, you can simply drop the vehicle off at the dealership at the end of the term and walk away. If you want to keep the vehicle, you can buy it for the price listed on the initial agreement, which is set by the finance company, according to Edmunds.com.
Buying a Car
On the other hand, here are a few reasons why you may want to purchase your next vehicle.
Ownership of Asset
Even though it is depreciable in nature, you will have a tangible asset in your possession once the loan on the vehicle is paid off.
No Early Termination Fees
If you want to get out of a lease agreement early, you will have to pay a fee unless you transfer the lease to another individual. However, if you own your own vehicle, you can sell it at any time and be off the hook, as long as you have equity or are willing to pay the difference of the selling price and outstanding balance.
Leases restrict you to anywhere between 12,000 and 15,000 miles per year, but ownership allows you flexibility to travel all over the United States without having to worry about mileage limitations. However, you want to keep in mind that excessive mileage in a brief period of time may drastically diminish the value of your vehicle.
|Sales Tax||7 percent|
|Value at end of Loan/Lease||12,000|
449.23/month or 21,563.04 total
199.15/month or 9,559.20 total
Should You Lease or Buy?
Deciding whether you should lease or buy comes down to personal preferences. If you are a business owner in a field where perception is everything, prefer the latest bells and whistles every few years, or would prefer a lower down payment for a higher-end vehicle, then a lease may be right for you.
On the other hand, if you want something to show for your money, have the cash on hand to purchase a reliable vehicle, or don't mind coming out of pocket for major repairs, then you should strongly consider purchasing a vehicle.
Ultimately, the choice is yours, but be sure to do the math using a lease calculator before proceeding to see which situation best suits your needs.