Car finance is one of the major decisions most people will make in their lives. So, it’s a good idea to do quite some research before you decide on which car, and, more importantly, which financing path you’ll be taking. A common quandary is buying vs. leasing and understanding the advantages and disadvantages can look like a lot of work.
The decision between the two options often boils down to your situation, lifestyle, and personal needs. For instance, it would depend on your use of the car. If you think of business clients, then leasing can permit you to have a luxury vehicle for less money up front. Leasing vs. buying doesn’t always boil down to a simple money issue, but if you’re mostly concerned about money, weighing the pros and cons is a good way to start. Below are some of the most important issues that you need to consider when confused with leasing or buying a car.
Pros of Leasing a Car
The possibility of lower monthly payments
If your finances do not allow you to buy a new car without financing the purchase, then, due to its lower monthly payments, leasing can attract you. When purchasing, financing is based on the full value of the vehicle minus your original down payment. On the other hand, leasing only charges the driver based on the difference between the original price and the price after the depreciation of the car. Hence, you’re only be charged the drop in the car’s value over the years you’ve had it.
Always driving a new car
For people who have a low attention span when it comes to cars, leasing is a very attractive option. Leasing can allow you to always have the newest model car with the most recent innovations in technology and features. You’ll also most likely never have to deal with any maintenance headaches if you’re leasing every three years. In the end, you can get more car for less money.
Cons of Leasing a Car
Higher levels of insurance
If you are constantly going to have a relatively new and higher end vehicle, you also have to consider that your insurance costs will perhaps be quite high. It’s true that you can avoid maintenance costs with a leased car, but some of these costs may be offset by having to pay a higher level of insurance.
Leasing needs good credit
If you have bad credit, leasing may not even be an option for you. The overall costs of financing during a lease always exceed loans because at no point do you pay off any principal. Also, most leasing firms require you to have a healthy credit score along with a stable financial scenario.
Pros of Financing a Car
It is easier to budget and plan
When you finance a car, you can assess exactly how much you will be paying each month and how long it will take you to pay it off. These types of certainties are a real asset when staying on track with your budget and chalking out your future finances.
You have equity with a bought car
Whether you own or partially own your car, it can still be used for equity depending on your circumstances. If you need to free up some cash, you can always sell your car. Also, if you want to take advantage of some of the perks of leasing, you can also use your vehicle as a trade-in towards a down payment for a newer vehicle.
Cons of Financing a Car
Incurring expenses from mechanical issues
Once the warranty expires on you vehicle, any mechanical problems that may arise from that point on are your responsibility. You have to preempt that these costs will become more frequent as the car becomes older. Also, when you want to sell the car, you are responsible for the logistics that come along with trading in or privately selling the vehicle.
As soon as you drive a new vehicle off the dealership lot it depreciates in value and it will only continue to depreciate. Also, variables such as accidents and just general wear and tear will depreciate the value. Lastly, with the fast introduction of new technologies to the car market, your car can experience quick decreases in its resale value.
Eventually, the decision between leasing or buying is unique to each individual. If you want to consider things more short term, and want a car for less money, then leasing may be attractive. If you are looking for the security that owning your own car offers, then buying may be more your style. Ultimately, you need to decide on a route that best compliments your personal preference, while at the same time your financial scenario.
Interested in speaking with someone about your auto financing options? Let Canada Auto Experts do the work for you. Call 1-855-550-5565 to get approved for a reasonable car loan to build your credit, regardless of your credit.