Zoombak ™
Buy Versus Lease Cars, the Pros and Cons
Written By Sabah Karimi
Making the
decision to buy or lease a car can take some time, and there are
benefits and drawbacks of each option to consider. While leasing a car
can give you a brand new set of wheels from the showroom, you will
never actually own the car you're paying for without making
payments for the entire lease term. Buying a car gives you the option
to sell it any time you choose, and keep it as an asset; still, you'll
be responsible for all mechanical work and repairs.
If you're considering a new car purchase, consider these pros and cons of each decision:
Benefits of Buying a Car
Buying a car with cash or a loan means you are free of the
responsibility of monthly payments and can sell the car any time you
choose. Buying also gives you the advantage of purchasing a used
vehicle; you might be able to find a great price for a slightly used
vehicle that has a high resale value, and this won't necessarily
depreciate as quickly as a brand new car off the lot.
Key benefits of buying a car include:
-Your choice of car insurance - no limitations on what type of coverage
you have to have so total insurance costs can be lower than average
-Keeping the car at the end of your loan payment
-Reliable transportation that you control and own
Drawbacks of Buying a Car
While buying a car offers several benefits, there are some drawbacks of making the purchase such as:
-Potentially high maintenance and repair costs - these are wholly your
responsibility because you won't have warranty or repair services at
your disposal
-Having to pay a high sum in one go (unless you're getting a loan)
-Loan interest payments (unless you're paying cash upfront)
Benefits of Leasing a Car
Leasing offers some flexibility in having a vehicle because you won't
have to pay a large sum upfront. When you're leasing a car from a
dealership, you may also be able to get the car of your dreams - one
that you probably couldn't afford to pay cash for on your own.
Other benefits of leasing a car include:
-Ability to trade in the car for something else each year
-Warranty and repairs taken care of - the dealership will manage all repairs and maintenance to keep the car in great shape
-Driving a car that you couldn't afford to purchase through a bank loan or cash
Drawbacks of Leasing a Car
If you look at leasing a car as 'renting,' you'll quickly understand
the drawbacks of this type of purchase. Leasing a car means you are
simply paying to use the car each month; while you may have a new set
of wheels at your disposal, your money is going towards using that car
and not necessarily owning it.
The drawbacks of leasing a car include:
-Paying for depreciation - this is typically rolled into your lease payment and is an added 'cost'
-The contract - you have to commit to payments for the life of the
contract which can be detrimental to your finances if you can't keep up
with the monthly payments
-Higher insurance costs - you'll need to get premium insurance coverage which may be more costly than a car you might own
-Mileage restrictions - you may be limited on how many kilometers you
can rack up on the car each year and pay a premium for anything that
goes over your allotted mileage
Making the decision to buy
or lease a car will depend on several factors such as your monthly
budget, your short and long-term goals for owning a car, and whether
you want to build equity in a vehicle or own it upfront. If you're
entering a leasing agreement, you'll want to make sure you've read all
the details and fully understand the terms of the contract; if you're
buying a new or used car with cash, making sure the car is in good
shape can prevent excess costs in maintenance and repairs. Consider all
of these benefits and drawbacks when making your car buying decision so
you make the best choice for your new vehicle.