When buying a new car, an important point to consider is how you will be paying for it. Two popular methods for this are leasing and financing. Both methods come with their advantages and disadvantages and their specifications.
Leasing refers to when you pay for the car to use it for a specific amount of time. In this method, you will not own the car, but when the lease period ends, you can choose to either purchase it or return it.
Financing refers to buying the car, and you will have complete ownership of it. You can drive it however you want, and customize the car, and sell it off when you feel like it.
Read on to discover some factors to consider before deciding whether to buy or to lease your new car:
Down Payments
When you lease a car, you have to pay the first month’s installment, a security deposit that is refunded when the period ends, registration fees, down payment, and taxes.
When you purchase a car with finance, you have to pay the cash price or the down payment, registration fees, taxes, or any other fees.
Monthly Payments
With a
lease, you have to pay for the depreciation of the car, interest, rent charges,
taxes, and other fees. This payment is usually less than monthly payments for
financing/loans.
With
finance, you often have to take a loan to buy the car, which means you have to
pay off the whole value of the vehicle, interest, taxes, and other fees related
to the loan.
Returning the Vehicle
With
leasing, it is easy to return the vehicle as you can do so when the lease
period is over, and you have paid off the end-of-lease fees.
When you
have financed a car, to get rid of it you need to sell it to someone else in
order to upgrade to a new car.
Depreciation
With leasing, you do not need to be concerned about the future value of the car as
when the lease term ends you will have to return it, however because of this,
you will not gain any equity from the car either.
When you finance a vehicle, its value will depreciate, but any equity gained will be yours.
Restrictions on Distance Traveled
When leasing a car, both parties will negotiate on an agreed limit on how many kilometres the car can be driven annually. Any extra kilometres may result in extra
charges for the lessee.
When financing a car, there are no such restrictions, since you are the owner and
control how much you want to drive the car. However, if a car has been driven
for more kilometres, it may have a lower resale value then less driven cars.
Customization
When you are
leasing a car, it needs to be in its best condition so it can be resold. As a
result, if you have made any modifications to the leased car, you will have to
remove them and restore it to its original condition before the lease period
ends. During the customization, if any damage happens to the car then the
lessee will have to pay to restore it to its genuine state.
When you own
the car, you can make any customization and modifications per your wishes.
These modifications may affect the resale value of the car positively or
negatively.
In
conclusion, both leasing and financing have their pros and cons, and it is up
to the buyer to choose which method suits them the best.
