Ready to trade in that gas guzzler for something that is a little easier on the wallet? Then now is the time to do a little research and determine whether leasing or buying is better for you. There are ups and downs to both, and understanding exactly what is involved with each can go a long way in saving you money.
For years, financing (or buying) was by far the most common way of getting a new car. Then some entrepreneurial types noticed that businesses specializing in large equipment sales were enjoying higher profits by leasing instead of selling. They decided to apply the same techniques to auto sales by offering a lease option in addition to the established financing plans as a way to increase their profits as well.
The idea behind leasing was to make owning a car more affordable. People with limited funds for a down payment, or those with a less than desirable credit history, were now able to drive off the lot with a lot nicer car than they would have been able to using standard financing means. In addition, leasing allowed trading in the car for a new one every few years or so, which meant they could enjoy a virtually new car all the time.
When buying a car, monthly payments are applied to the balance of the loan until the loan is paid off. The car then officially becomes yours. When leasing, payments are made each month for the use of the car. Unlike traditional financing, the car company will continue to own the vehicle, but your payments continue until you either terminate the lease or trade the car in for a new leased car.
Whether you should buy or lease a car depends upon your particular situation. For example, if you entertain clients and may be able to get a tax write-off doing so, leasing a car may be the way to go. With leasing, down payments, as well as monthly payments, are less and you are only taxed on the amount you finance for the period you have the car.
On the downside, you won't own the car at the end of the lease, and you'll be limited on the amount of miles you can drive each year, usually between 12,000 to 15,000 miles (extra miles are charged at a steep rate).
When buying a car, you have the freedom to make any changes to the car you want, and you can sell it at any time. You can also drive the car as many miles as you want each year, and once it is paid off, it is all yours.
Leasing makes it easier to get more car for less money, and you will always be driving a new car. However, in the long run you will be paying more because one lease usually leads to another, and this means you will always be making monthly payments without ever having the benefits of owning a car. When you buy a car, and finally pay it off, the vehicle basically becomes "free" transportation with only gas and maintenance to pay for until it dies.
In the end, it's up to the consumer to evaluate exactly what his or her desires and goals are. Do some thorough research, and make an informed decision that best fits your needs.
