There are lots of reasons why you might want a new car. You might have landed a new job far from where you live, you might be in a situation where public transportation is not a viable option for you or want to start taking trips on the weekends. Regardless of the reason, the question that arises is whether to buy or lease one. This is not a new question, but it can be a difficult one to navigate especially if you have never compared both options side by side. In this article, we will be doing just that, helping you see which option would work best for you.
Control Over the Car
So, you’ve decided, “I’m going to sell my car and swap for something new!” Now is the decision on what you want to do. A major difference between buying and leasing is how much control you have once you get the car. When you buy a new car outright, you have the right to do with it as you please, as long as you stay within the law. You can modify and decorate it, put as much mileage on it as you like, install aftermarket stereo systems or do something else entirely. You are only limited by your imagination and the law.
When you lease a car, you get a lot less flexibility. One thing you will run up against is the allowed mileage at the end of the contract. When leasing the car, you have an agreement with the business leasing the car on how much mileage you are allowed. In many cases, the mileage will range from 5000 to 30,000 kilometres depending on the car’s make and model as well as the lease period.
The higher the mileage, the higher the cost of the lease because of tear and wear. The general rule is that the higher the mileage, the worse the tear and wear and thus the higher cost of repairing it. The business will pass some of this cost to you by charging you higher per month if you want more mileage.
Additionally, you will have to pay more if you surpass the agreed mileage. It is therefore a good idea to think about how you will use the car and how much you will drive it before leasing one so that you know what option to choose and to avoid going over the set mileage limit.
Cost
The cost of buying versus the cost of leasing one is very different. If you are buying a car in cash, you only have to negotiate with the dealer to get the best price for the car. Once the deal is done, you do not have to think about it again.
However, if you are like many people, you might finance the car. When you finance a car, the dealer will take the value of the car, minus any deposit you put down, add the interest you need to pay, and then divide the sum by the number of months in the term agreed. The final number is your monthly payment and there is no additional payment at the end of the lease period.
When you lease a car, you also pay a deposit and then are told the monthly payment for the contract period which is typically two to three years. The two major differences between financing a car and leasing are that the monthly payments for leasing are often lower than those for financing and there is no interest charged when leasing.
Because the monthly payments for financing are often higher than for leasing, some people opt to lease a better car for the monthly cost of financing one. This happens a lot with electric cars where the monthly financing cost can be quite high because of the higher cost of the car.
The affordable leasing cost is one of the reasons why electric car leasing has grown in popularity in recent months. Additionally, some people see leasing an electric car as a great way of finding out if it is the right option for them when thinking of buying one. If you are thinking of buying one in the future but want to lease one first, platforms like ElectriX can help you learn everything you need to know about electric cars. Their informative guides cover everything from installing a charger to the cost of changing and even finding the right insurance.
Depreciation
All cars depreciate as they get older. However, you need to think about depreciation when buying a new car, but not as much when leasing one. Unless you want to run the car you bought into the ground, you will sell it at some point.
When you decide to sell, its value will be a lot less than it was when you bought it. This value will be determined by how much you have driven it (the mileage) as well as the condition it is in. The exception is a special run, luxury or vintage car that typically appreciate over time.
You might also think about trading the car in. You might not get a good deal if the car has been used and depreciated extensively.
With a leased car, you do not have to think about depreciation or selling it. Once your contract period is up, you just return it to the dealer.
Upgrading
Upgrading is one area where leasing a car becomes a much better option than buying one. Since your contract will last two to three years, you have the chance to drive a new car every time you get a new lease. You get to enjoy new features and technologies, while also driving a reliable car you know will not give you any mechanical issues.
When you buy a new car, you will typically not have the option of upgrading it regularly. With a financed car, you will not be able to sell it to upgrade unless you complete the payment first. You will need to pay any remaining money plus interest before you can sell the car.
The second reason is that you might not be able to sell the car you have due to depreciation. When you do, you might not get a good deal and thus be left with trading it in. This last option can be a downgrade unless you have the cash to bridge the gap between the value of the car you already own and the one you want to upgrade to.
The limited flexibility of upgrading a car you have bought or financed is why leasing is a great option if you want to keep driving newer models and enjoying everything they come with.
Maintenance
This technically falls under the cost of owning the car, but it is an important point to discuss. When you buy a car, you are responsible for maintaining it. It is a good idea to take your car in for regular maintenance to ensure it keeps running fine for years.
Some lease contracts include the cost of maintenance. Instead of paying for maintenance out of pocket, it is added to your monthly lease cost. The only thing you are left with is taking care of the car and fuelling or charging it.
Buying and leasing a car have their pros and cons. If you are looking for equity, buying a car is a great option. Leasing could be for you if you want the freedom to choose a new car every lease period and lower monthly costs.
