Buying a new car is such an exciting experience. We love the smell of new leather, the comfortable seats, the clean interior…the list just goes on and on! But going to a dealership and trying to purchase a new car can often be confusing. You have different makes, models and add-on options to consider. It can seem overwhelming!
One of the biggest questions that you’ll be presented with when buying a new car isn’t about what type of audio system that you want in the car; it’s about whether you want to buy your car outright or finance it, or lease it. Although the choice can seem daunting at first, we’ve got some tips for how to choose between buying and leasing.
What’s the Difference?
With either purchasing or leasing, you get to take the car home immediately. The major difference between purchasing a vehicle and leasing it comes with the conditions imposed after the car transfers into your possession.
With a purchased car, you can either pay up front or decide on a payment plan through a bank or other financial institution. If you decide to take out a loan, the bank technically owns the car until the balance is paid off. That means the title to the car will also stay with them. Although the bank still owns the car, you are free to keep the car or do with it as you please. You have the ability to drive it, sell it, or paint it a different color depending on your preference.
With a leased car, what you can and cannot do with it is up to the legal owner of the car (usually the dealership). You, as the lessee, have no control over what happens to the car after your lease period is up. You must abide by the terms of the agreement, like mileage restrictions, while the car is in your possession.
How Do I Choose Between the Two?
Choosing between buying and leasing a vehicle depends completely on the habits and preferences of the shopper. What is right for one person isn’t always right for another. Each person must consider their financial situation and purchasing habits to make a decision.
Buying a car is great for someone who wants to make an investment into a form of property. Since the car will be yours after it is paid in full, you have the opportunity to add another asset to your portfolio. If you are interested in modifying your car, like altering the engine, you’ll want to purchase your vehicle, not lease it. Conversely, down payments and monthly financing payments can often be higher on a car that is purchased.
Leasing a car is great for someone who wants to constantly have the newest car model. After the lease terms of your vehicle, you have the ability to find a new one that suits your needs and interests. You don’t have to worry about selling your car or negative equity when you’re trading up. In addition, down payments and monthly payments can be less than if you decided to buy. But leasing comes with its disadvantages, too. After making payments for a few years, you technically have no equity in the car. And you aren’t able to make many modifications on your vehicle without violating the terms of your lease agreement.
Although this is a big decision to make, remember to have fun with the shopping experience! Happy shopping!