Written by: Daniel Kukainis
Deciding between buying and leasing a car can have an impact on your budget and overall financial plan. Buying a car is often the better choice long term after weighing out all of the factors. However, there are many different benefits and drawbacks on either side, so leasing a car could very well be the better choice for you. The key is understanding what you are getting into and factoring in the points below into your decision.
Buying a Car
-No mileage restriction.
-After your loan is paid off there are no more car payments.
-Typical auto loan is 5 years.
-Customize your car however you wish.
-Don’t have to worry about excess tear fees.
-The car becomes your asset and improves your net worth.
-You have the ability to sell your car, albeit at a depreciated value, whenever you’d like.
-Your car instantly depreciates $2k-$5k after purchasing off the lot.
-Your car will also depreciate in value each year.
-Avoid brands that have cars with a low resale value – check used cars online of the same model to see how they have depreciated.
-Higher monthly payment than a lease, depending on how much money you put down on the car.
-Your sales tax will be much higher than if you were to lease a car.
-Features will become quickly outdated with the rapid development of technology in car manufacturers each year.
Leasing a Car
-Pay less money up front.
-Lower monthly payments.
-Lower maintenance costs.
-Latest technology and safety features.
-You may be able to have your mile overage forgiven if you enter into a new lease or wind up purchasing the car.
-You may be able to write off the expense if you are a Small Business Owner.
-Mileage restrictions – typically 10k/year. You can get a higher restriction, but this will increase your monthly payments.
-Dealers usually charge around 25 cents per mile over your limit.
-Higher car insurance payments.
-Limitation on customization.
-You will always have a car payment.
-Every 2-3 years you usually have to put a down payment on another lease.