Investing in a car is a major decision and it is not the best idea to spend your savings on the same. The choice between leasing v/s buying a car can be a difficult one but with the right information, you can always make a better decision. Tim Pawlenty quotes, “Financial literacy is an important part of avoiding financial mistakes and planning for a strong, secure financial future.” To help you avoid spending your money the wrong way when investing in a car, Carsfast have created this guide on the pros and cons of leasing v/s buying a new car. This will help you lease or finance a car depending on your financial status and your priorities.
What Is Leasing A Car?
Leasing is similar to renting. You only pay for the value of the car that you use when you lease a car. There is an agreement signed by you for a period of two to five years that allows you to drive a new car and then return the same at the end of the lease term. The payments on leasing are low as you only pay for the depreciation costs. The downside of leasing a car is that you do not get full ownership of the car which means that there will be some restrictions on the car. At the end of the term, you can either buy the car or turn it in.
Buying A Car With Car Loans Canada
If you wish to buy a car, you have two options- you can either pay the full amount in cash right at the time of purchase or you can take out a car loan. Paying the complete amount upfront is not a very feasible option and you must always set aside a part of your savings for an emergency. Borrowing a loan to buy your car is a great option even if you have large savings. You can make a major down payment and the remaining amount can be paid by you in parts over the term of the loan. The eligibility criteria for qualifying for a car loan will require you to have a high credit score which will make it possible for you to get a lower car loan interest rate.
Should You Buy Or Lease A New Car?
Should I buy a car or just lease one? If you are low on your savings and even an auto loan does not seem like a very feasible option, you must be questioning this often. The main difference between buying a car and leasing one is ownership. Is your priority owning a car and having equity in it or do you just need a car for commuting to work or travel sometimes? If you can answer this question, you will have your answer as to whether you should buy or lease a new car. If you wish to own a car and will be keeping it for years to come, you must finance a car but if you like having a new car every few years just lease a car. In the following sections, we will look at the features of buying and leasing a car in detail to help you pick the best option for you.
Pros And Cons Of Leasing A Car
Let us take a look at what are the benefits and downsides when you lease a car.
- The monthly costs of leasing are lower.
- You can have a new car to drive every few years.
- You do not have to worry about re-selling the car.
- The major downside to leasing is that you do not get ownership of the car.
- There are restrictions on the number of miles you can drive
- You cannot trade in or sell the car if required.
- There might be additional fees that add up to your cost.
Pros And Cons Of Buying A Car
What are the advantages and disadvantages of buying a car on a car loan? Let us find out.
- There is no restriction on how much you can drive your car and if you can modify the car or not.
- You have complete control over the sale and trading-in of the car
- With a good credit score, you can get the loan for a low-interest rate.
- If your credit report is not good, you will have to pay a higher interest rate.
- The value of cars depreciates faster than you can think of.
Pros And Cons Of Leasing V/s Buying A New Car
In the previous sections, we have looked at the pros and cons of leasing v/s buying a car. To help you sum up and compare the differences between leasing and buying, we will now do a quick comparative study. In this section, you can take a look at the features of leasing and buying to make a final decision about whether you wish to lease a car or finance your car with a car loan or even buy a car with cash.
|Leasing A Car||Buying A Car|
|You do not get ownership of the car. You need to pay as long as you wish to drive the car.||All payments go towards the ownership of the car. You can own the car for as long as you want.|
|You might get an expensive luxury car at a lower cost.||Expensive cars will cost you higher.|
|There are no down payments mostly and the monthly payments are low.||You might have to make a higher down payment and the monthly installments of a car loan might be high too. This will depend on your credit score and past payment history.|
|You have the option of upgrading with every new lease.||The upgrades here are restricted to the technology of the car or a new purchase that you make.|
|The car can be turned in or bought at the end of the term.||You need to arrange for buyers if you wish to sell the car.|
|When you lease a car, you will have some restrictions on the miles allowed and what modifications you can get for your car.||There are no restrictions on a car that you buy even if it is a financed car.|
|There are multiple fees charged at the end of the lease term which might spike up the cost of leasing.||There are no additional charges.|
|Some hidden charges do not come up until the end of the lease.||All costs like the interest rates and other charges are known to the borrower.|
|Leasing can cost you higher if you lease a car for a very long time, or have multiple leases.||If you buy a car and keep it for years, the overall costs will be lower.|
If you need a car and do not have the amount to make a down payment, you have two options, leasing a car or buying a car on a loan. Both these options will add to your expenses a monthly payment that has to be made. Other than this, there are many factors to differentiate between leasing and buying. In this article, we have compared the pros and cons of leasing v/s buying a new car. We have looked at both these options in detail to help you make an informed choice. Depending on your financial status and your requirements, you can choose to buy or lease a car of your choice. Make sure to thoroughly research the available offers and choose the best deals.
What are the 4 major disadvantages of leasing a car?
The 4 major disadvantages of leasing a car are
- You do not get full ownership of the car.
- There are fees charged if you wish to end a lease early
- You do not have the option of selling or trading in the car
- There is a restriction on the number of miles you can drive for.
Why is leasing a car better than buying one?
Leasing is better than buying a car because you can have all the benefits of owning a car without having to pay the on-road price of the car. The monthly payments of leasing are much more affordable than owning a car with an auto loan.
Why leasing a car is smart?
Leasing a car is a smart decision as you do not have to make a major down payment or pay a huge amount upfront. With your monthly payments, you can enjoy the benefits of owning a car and getting a new car every few years.
Is it smarter to lease or buy a car?
If you like to drive a new car every few years and are willing to have a car that you do not fully own, it is better and smarter to lease a car.