Ben Todd | Jun 3, 2017 | 2
Is It Better to Buy or Lease a New Car
What makes some people decide to lease a new car and what makes some people buy a new car? Getting a car lease is not as popular these days because people seem to think that buying a car is a better investment, but on many occasions it is not. In this article, we give you all the information you need to know to help you decide if you should buy a new car or lease a new car.
It Is Better If You Lease For A Shorter Period Of Time
If you lease a new car for 12 years and you buy a car on finance with a 12-year repayment plan, then in that case it is better to buy the car. In both cases, you get 12 years of enjoying a car, but if you buy then you get to continue enjoying the car.
If you were to lease a car for three years and buy a car on finance with a 3-year repayment term, then in that case it is better to lease the car. The cost per month to buy the car would be tremendous.
[+] Lease A Car? – Buy a lease for a shorter period of time and leasing is better
[+] Buy A Car – Buy a lease for a longer time and buying a car would have been better
It Is Better To Buy If The Car Is Not New
If you were to lease a new car and buy a second hand one, then the leasing deal still wins over the buying deal–unless the lease was for six years instead of three. The shorter the lease deal is, then the better value for money it is when compared with buying, even if you are buying a second hand car.
If you are buying a second hand car and you are leasing a second hand car that is over three years old, then buying the second-hand car that is three years old is better value than leasing. The cost of a three-year old second hand car will be much lower than if were to buy a new car.
[+] Lease A Car? – Buying a lease is a better idea than buying a new car
[+] Buy A Car – Buying a secondhand car is better than buying a lease
Do You Enjoy A Change Every Few Years?
Most people would love the idea of having a new car every few years, which is why many people like to lease a new car. If you were to try such a thing where you bought cars instead of leasing them, then you would have to pay much more money.
When you buy a new car, a significant chunk of its value is lost when you drive it off the car lot. After three years, you will only be able to sell the car for a fraction of the price you bought it for. If you lease a new car, then you get to enjoy that car for three years without having the expense of buying a full car. You do not have to try and recoup your losses by selling the car before you buy your next car. When you lease a car, you do take a loss, but the loss is far less significant than if you buy a new car and then sell the car to help fund your next purchase.
[+] Lease A Car? – Leasing is great for people who like to change it up frequently
[+] Buy A Car – Buying is better for people who can stick with a car for a very long time
Businesses May Prefer To Lease Cars
When you lease a new car, you have all the benefits of owning a car without the hassle that usually comes when you buy cars. Businesses may buy leases for new cars and deduct the expenses from their businesses tax returns.
The new cars that are leased shouldn’t have any problems with them. They are new cars, so things shouldn’t need replacing and/or fitting. The expenses, especially mechanical expenses that come with buying a car.
[+] Lease A Car? – A lease may be most ideal for businesses that can deduct the expense
[+] Buy A Car – Businesses should buy vehicles if they have the capacity to maintain and fix them
Why Do Lease Payments Cost Less Than Car Finance Payments?
When you buy a car and pay it off, you may spend years buying it, which means your monthly payments are lower. However, cars tend to cost thousands, which means you have to pay a lot of money, which means your monthly payments are higher.
When you pay for a lease, you only have to pay monthly payments during the period you have the car and nothing more. You also pay for the amount of value that the car loses. The amount you pay works by taking what the car is worth when you lease it, and taking what it will be worth when you give it back and working out the difference. The difference is the amount you pay, and that amount is spread over the amount of time you keep the car.
The way that leases work may explain why they are usually cheaper than car payments, but there are exceptions. For example, if you buy a cheap car over a long period, and you lease an expensive car that loses value very quickly, then leasing the car would probably be more expensive than buying the car in that case.
[+] Lease A Car? – Lease payments usually cost less than buying a car
[+] Buy A Car – Cars cost much more, but you end up with something you can keep
Leases Have A Predictable Cost Of Ownership
You are told in advance how much you are going to pay from the start of the lease until the end of the lease, repairs during the three years are unexpected, and your car is probably still covered under warranty. You still have to maintain the car, but even those costs are predicable. If you bought a car, you couldn’t predict the fees and costs associated with the car for its lifetime.
Predictable costs are ideal for businesses and for people who have their travel expenses paid by their employer. Predictable costs are great for people who are budgeting and for people who are buying a lease for another person.
[+] Lease A Car? – Budgeting with a leased vehicle is very easy
[+] Buy A Car – Buying a car is okay if you do not need predictability
Limits On The Miles Is A Problem For Some People
If you buy a car, then there is no need to worry about how many miles you travel. If you lease a car, then you have to worry about how many miles you travel. A leasing company doesn’t have to put a mileage limit on the car, but it is in their interest if they do.
Having a mileage limit is not as bad as it sounds. The downside hits home harder if the leasing company has a small mileage limit and a very high penalty for going over the mileage limit.
[+] Lease A Car? – Find a company with higher mileage limits and leasing becomes more attractive
[+] Buy A Car – There is no limit to how many miles you may travel if you own the car.
What Does The Dealer Define As Wear And Tear?
The car is expected to be returned in the same condition it was bought it. Only usual wear and tear is acceptable, but you are going to have to do a little research into what the company considers to be normal wear and tear.
You should take a look at the small print on the contract they offer because it should give you guidelines. Another great place to find out about their wear and tear policy is online. When people use the service and get screwed over, they go online and complain about it. They will complain to online review websites and forums, so take a look around at what people have said.
[+] Lease A Car? – Find a company with liberal wear and tear philosophies and you will be fine
[+] Buy A Car – You can smash up your own car as much as you like
Complaints That You Have No Equity In A Lease Car
People seem to think that not having any equity in a lease car is a bad thing, but it is what you are paying for (as odd as that sounds). You can pay $3000 and give the car back without having any equity in the car, or you can pay $9000 and have equity in the car (where you may sell it for $6000). Put it that way, and you can see how not having any equity in the car is not a bad thing. It only becomes a bad thing if you have had the car for years and years and you have paid thousands upon thousands for the car.
[+] Lease A Car? – You don’t own the car, but you only pay a fraction of what you pay when buying
[+] Buy A Car – You have a car when you have finished your car payments
Enjoy The Newest Car Features
If you lease a new car every three years, then you are able to enjoy all the newest car features that have just become available. Things such as fuel consumption keep getting better, as do security features on cars. When you lease a car every three or four years, you are able to enjoy features that other people are not able to enjoy if they buy a car.
When people buy a car, they are stuck with the technology that car has for many years. If you use your newly purchased car for 10 years, then it is only up to date for one year, and by the end of its life it is ten years out of date.
[+] Lease A Car? – Enjoy the newest features that cars have to offer if you lease every three or four years
[+] Buy A Car – You may update your car over time if you are worried about staying up to date
Is It Easier To Buy With A Lease Or On Finance?
If you have a poor credit rating, then getting a lease is very tricky. Most leasing companies only start to make a profit near the end of your lease, so they are very concerned with not being paid.
Car sellers make their money as soon as you agree to buy. Yes, they do make a loss if you stop paying, but the longer you pay, then the safer their investment is, plus they can always repossess your car and sell it again to cut their losses and maybe still make a profit (experience when they keep coming after you for payment).
If you have a good credit rating, then you should be able to get a car lease or finance for a car. Buying a car may cost you slightly less if you have a good credit rating because you may save on interest. The cost of your lease will probably stay the same if you have a good credit rating. The rate you pay may only differ a little if you have a good credit rating and you want to lease a car.
Conclusion – Lease A New Car Or Buy A Car
If you are considering a longer lease, then look into buying a car. Consider buying a second-hand car if you buy, and consider leases if you prefer a change every few years. If you own a business and you do not have the staff or tools to maintain your cars, then strongly consider leasing, especially since the expenses for leasing are very predictable. Lower your monthly outgoings with a lease because they often have cheaper monthly payments. Do your research into mileage limits before you lease, and opt to buy if you need to travel larger/higher amounts frequently. Find a lease dealer with a liberal view on what wear and tear means, and don’t worry about having equity in the car unless you are willing to pay far more than what you will pay for a lease.