Benefits of Leasing a Car

Finances are often a key factor in whether one wants to buy or lease an automobile. It is becoming more difficult these days, with credit being harder to obtain, to buy an automobile, without a reasonable down payment. If one doesn’t have much money to put down, than leasing may be the best option.

Leasing a car may benefit the driver if he or she does not drive significant miles in any given year. Typically, leased cars come with mile restrictions. This is to ensure that when the automobile is returned its depreciable value hasn’t dropped significantly. If a driver exceeds the maximum leased miles he or she will be charged for every mile over the limit. This can be a significant financial hit to the person leasing the car.

Leasing may be the best option for people who like to drive different cars, or newer cars every few years. If one buys a car and then doesn’t like it, due to performance, or mechanical issues, he or she is stuck with it until they trade it in. For people who lease, they have a set period, usually 3 to 4 years in which they will drive the vehicle. Then they can turn it in, to lease or buy a different car.

Benefits of Buying a Car

Buying a car makes the most sense if one plans on keeping the car for an extended period of time. If one takes out a car loan, say over five years, pays off the loan, and keeps the car around 10 years, the amount of money spent on the car will be significantly less than if one was to lease the car.

When a person leases a car, they never own the vehicle. They spend a set amount of money per month, and at the end, they must return the vehicle. Buying a car, allows an individual to purchase the car and drive it until they want to trade it in.

Cars being manufactured today are built much better than they were 20 to 30 years ago. Well maintained cars should last 10 years if properly taken care of. If one has money for a down payment, and can get a reasonable monthly payment figure, I’d recommend buying a car, if one will keep it over 8-10 years.

Benefits of Buying a Used Car vs. New Car

Buying a used car, makes financial sense if one buys a car after 3 or four years. Cars depreciate rapidly after the first couple of years. Thus, one can get excellent value buying a used car, often $10,000-$20,000 off of new car price, depending on the model. The downside of buying a used car is that you may not know the history of the vehicle, its accident history, or how the previous owner treated it. In addition, financing for used cars are higher than new cars, typically 2-3% percentage points higher than new car financing rates.

Buying a new car from a dealer, although more costly than buying used, gives the buyer peace of mind. These cars will have 3 yr 36,000 mile warranties. If anything breaks the dealer will replace with at no cost.