Whether you want to buy a vehicle or lease a car is a big question, and one that can have a huge impact on your finances. If you’re looking into getting a new vehicle, then you might be wondering which is the right option for you. And we’re here to answer the question for you! We’re taking a look at the pros and cons of buying and leasing to help you make the best decision for your needs.
Buying vs. Leasing: The Basics
Let’s start from the very beginning. If you lease a car, you will pay a certain amount of money each month to a car dealer in order to use your vehicle. At the end of the lease term (usually around two to five years) you will return the car to the dealer, at which point you’ll decide once again whether you want to buy or lease another vehicle. If you buy a car you will either pay full price or get a car loan, and then the car is yours. Once you want to buy another vehicle you’ll need to sell your old car, and may need to pay off the loan if you got one. Simple, right? But things are actually a little more complicated than that….
Want to Lease a Car? The Pros
Leasing a car can be very attractive, and there are some good benefits to leasing. You’ll be able to get a new vehicle every couple of years, for a start. But also, monthly payments on lease cars tend to be lower than loan payments if you’re buying a vehicle (of course, this won’t apply if you’re buying a car outright). This means that you might be able to afford a better model if you lease a car rather than buying one. Plus, you won’t need to deal with the hassle of selling an old vehicle when you’re ready for a new car.
Want to Lease a Car? The Cons
But leasing a car isn’t without its down sides. The big problem for many people is that you won’t own the vehicle. That means that you’ll be paying money every month, but you won’t be able to get any of that investment back by selling the car later (as you would with a vehicle bought using a loan, for example). There are also additional costs to leasing a car that you may not have considered…
If you’re hard on vehicles, and there’s a high chance that you will damage your car, then you should be aware that most car leasing companies will charge a wear and tear fee, which you’ll need to pay (depending on the amount of damage caused to the car) when you return the vehicle at the end of your lease. Plus, if you drive a lot, many leasing companies also charge per kilometre for any distance you drive above a certain limit. That monthly limit of kilometres will depend upon your lease.
Finally, you might find that your insurance premiums go up if you lease a car. Why? Because many insurance policies for leased vehicles include something called gap insurance. This is used to pay off the remaining lease if the car is destroyed in an accident. Not all insurance companies do this, but many will, and of course this will add to your monthly costs of running the car.
Want to Buy a Car?
Your other option is to buy a vehicle, and of course this has its good and bad points too. If you buy a car you will, more or less, own it. This means that when you’re ready for a new vehicle you’ll be able to sell the old one. You won’t, however, get the same amount of money back that you paid for the car, since cars go down in value over time, but you’ll get some of your investment back. Don’t forget though, if you got a loan to buy that car then you’ll need to pay back your loan as well!
However, you’ll be able to drive your car as much as you like, with no monthly kilometre limits. Your car insurance may be lower (though that depends on your driving skills, and all kinds of other things, check out our article on what effects car insurance quotes for more info). If you do any damage to the car, it’s up to you when, or even if you want to pay to fix it. You may decide that a couple of cosmetic scratches aren’t worth paying to paint, for example.
The down side of all this is really a financial issue. Either you’re going to need to find the full sum of money to pay for the vehicle up front, or you’re going to need to take out a loan, and monthly loan payments are liable to be a lot higher than the monthly payment you would make to lease a car. For many people this financial problem is really a deal breaker, and means that leasing is the only option.
Buying vs. Leasing: The Financial Bottom Line
The financial bottom line for leasing versus buying is quite interesting. Depending on the model of car you choose, and on whether you’re going to need to pay extra leasing costs such as wear and tear or kilometre driving charges, in general, it is cheaper to lease a car than to buy a car in the short term. Over a five year period, leasing a car usually saves you a few Rands. However, you must remember that if you buy a car you can always sell it after five years and get some of your money back, which you can’t do with a leased car.
In the long term, over a ten year period, for example, you will generally save money if you buy a car rather than lease a car. But again, don’t forget that the monthly cost of buying is going to be a little higher.
So, Buy or Lease?
Whether you buy or lease a car is going to depend on your personal situation. Generally, buying is going to be your best investment. However, you’ll need to run the numbers for yourself and find out what you can afford to do. If you can’t afford monthly loan payments or to pay full price immediately for a vehicle, then leasing may be the only option available to you.
If your only choice is to lease a car, then you can save yourself some money by being careful about the terms of your lease and being careful with the car itself. The less damage you do over the course of the lease, the lower your wear and tear payment will be at the end of your lease. The fewer kilometres that you drive, the lower your monthly cost will be (assuming that your lease includes a monthly kilometre limit).
Buying and leasing both have their pros and cons, and in the end, the decision is yours. Just make sure that you’ve considered all the factors that we’ve mentioned above before making that final choice!
Main subject: lease a car
