When it comes to leasing a car versus buying, there are two schools of thought. On one hand, there are people who think that buying a car is better because you own it in the end. On the other hand, there are those who prefer leasing because the monthly payments are lower.
These days, more and more people are choosing to lease a car rather than buy, and it looks like the trend isn’t going to stop anytime soon. Today, we look at the pros and cons of each to help you make an informed buying decision.
Should you lease or buy? Let’s discuss.
Leasing Has Lower Monthly Payments
The biggest advantage of leasing a car is the low monthly payment. The monthly payments for leasing are about 1/3 lower than for buying one — according to Forbes. When you lease, little to no down payment is required and you don’t have to pay sales tax upfront.
Monthly lease payments are usually lower than loan payments as they are based on the car’s depreciation during the time you drive it, not the purchase price.
When you buy a car, you have to make a down payment of 10%-20% of the car’s total cost. The specific amount of money you have to pay will depend on several factors, one of them is your credit score.
When you Buy, You Can Build Vehicle Equity and Get a Car Title Loan
Vehicle equity is the value of your car. If you have a car loan, it’s the difference between the vehicle’s value and the owed amount. If your car’s value is higher than what you owe, you have equity.
One of the best ways to build equity in your car is by making a down payment of at least 20% when you purchase it. Another way to steer clear of negative equity is to ensure the loan term is as short as possible.
The great thing about building vehicle equity is that you can get a car title loan and use that money when you have financial difficulties or just have a need for fast cash. However, it is worth noting that to borrow against your vehicle, you must have enough equity in your car to fund the loan. Most lenders offer car title loans between 25%-50% of the car’s value.
Buying Has No Mileage Limit
CNN money notes that one of the best things about leasing is you can negotiate the monthly payments. But leasing is not for everyone.
If you want a car you can drive for as many miles as you want, it’s better to own it. If you drive a lot, over 10,000-15,000 miles, you may have to pay extra for each mile.
Most leasing companies charge 15-20 cents a mile for extra miles, but you may pay less if you buy the extra miles upfront. According to Kiplinger, the extra mileage penalty is off-putting, but it also applies when you’re trading in a car you bought and the mileage is above average.
Whether you choose to lease or buy a car depends on your budget, goals, and personal preferences. Both options have their upsides and downsides, the key is to determine which one is more beneficial for you.
