Is it better to lease or buy your next new vehicle?
Buy or rent a new vehicle?
If you’re in the market for a new vehicle, you may be wondering whether you should buy or lease one. There are many TV commercials that make leasing look very attractive because of the low monthly payments. However, leasing a new vehicle is not the best solution for all car buyers.
What type of vehicle owner are you?
Some vehicle owners like to keep each car until it has done a couple hundred thousand miles. This is a source of pride for them. They also enjoy the benefits of owning their car long after the last note on the car has been paid.
Others want to be able to choose one of the newer models every few years. They love learning about new models and updated features. Some people have to buy new cars because they need to present a certain image for their job or business. These people believe that they will always live on a car payment, but will never have to drive an older car.
If you like to maintain and repair a car for as long as you can, you will probably benefit more from buying it. You can pay off one loan and then start saving for a big down payment on the next one because you plan to buy several years down the road!
However, if you plan on getting a new car every few years, you may want to consider a lease. It is easier to trade in the old car and buy a new one. You don’t have to worry about selling a used car.
Initial payments and fees
If you think a lease will get you out of a down payment, you may be wrong. When you see ads on TV with very low lease payments, it’s harder to notice the fine print. Many leases require a down payment or fee. This could be even larger than a typical down payment on a new vehicle!
Mileage
Do you need to drive a lot for business, work or pleasure? If so, you should be aware that many leases have maximum mileage allowances. If you drive more than that amount, you may have to pay extra money. Drivers who do a lot of mileage should make sure they understand the rules of their leases. They may be better off with a purchased vehicle.
Sure
If you rent a car, or need to get a loan for a new vehicle, you’ll still be responsible for it. In any case, you will have to take out comprehensive insurance. So you won’t really save any money at all. In both cases, you may also want to consider GAP insurance. This covers the difference between the actual value of the vehicle and the amount of money you are responsible for. A typical auto policy will only cover a car up to book value. This amount may be much less than the amount owed.
Should you lease or buy?
As with so many financial decisions, there is no one right answer for everyone. Your best choice will depend on the terms of your lease or purchase, how you plan to use your car, and your own personal situation!