Your next car will depend on your needs and your circumstances. You can choose to buy a car or you can opt to lease a car, but what is the difference?
What You Need to Know About Leasing a Car
Leasing is a long term rental agreement between you and a bank or a car manufacture.
With leasing, you will never own the car, but rather give the car back at the end of the agreement. You can then choose to get a new car or to walk away. The leasing company then retains the asset, which still has value even though it is now a used model. In essence, you have financed the depreciation and interest costs for a period of time.
So, how does it work and does it work?
You will sign aperiodic lease agreement with the service provider upfront, which means you can calculate the monthly expenses. A leasing agreement generally includes comprehensive insurance plus a full maintenance plan, but there are conditions, so ensure you understand your agreement. Some lease agreements will have an annual mileage limit.
The monthly payments on a car lease can be quite a bit less than a traditional finance agreement depending on the lease agreement. This can work in your favour if you plan on owning a car for short time and if interest rates are high.
However, when returning the car there is an audit process. The leasing agent will scrutinise the car to evaluate the condition. If they find something that they don’t consider to be normal wear and tear or if you have exceeded the allotted mileage then you will have to pay extra fees.
Buying A Car
When you buy a car, you will obtain ownership of it at the end of the finance period which can be seen as a long term investment. Once the car is paid off, you will have an asset that you can use, sell for cash or trade-in for a new car instead of having to pay a deposit. If interest rates are low, then buying a car is abetter option as the monthly instalments might be similar to that of leasing a car.
Buying a car is a good option for those that want to drive the same car for a long time or when they are looking for a used car.
However, if the car you have bought doesn’t come with a service plan then you will be liable for any repairs and maintenance plus fuel, insurance etc.
Choosing between buying and leasing will depend on your circumstances and what deals you can find for both and if you want to own a car or just drive a car for a short time.