Should You Buy or Lease a Car?

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by on March 12, 2014

car paymentFor many Americans, cars are not just a luxury item, they’re an essential part of everyday life. According to Cars.com, consumers purchase vehicles in a variety of ways, most often by financing. A very small percentage of buyers are able to purchase a vehicle in cash. Another 20 percent choose to lease their vehicles. While buying can be the cheaper option depending on how you plan to use a vehicle, many consumers find that leasing offers several key advantages and can actually save money in some situations. There is also less financial liability involved with leasing. Here’s a quick guide to weighing the pros and cons of buying vs. leasing:

Value depreciation

When you consider how long you might own a vehicle, it’s important to consider the car’s likely depreciate. All vehicles depreciate over time due to the age of the vehicle, the damage it sustains, and the mileage it accumulates. New vehicles, however, depreciate sharply as soon as they’re purchased, typically by about 25 percent. Even the modest depreciation of a vehicle can lower its value by thousands of dollars in a single year, according to Lifehacker. That’s not an issue if you plan to keep the vehicle for a long time, but if you plan to sell it within a few years, you’re almost guaranteed to lose money. For that reason, leasing typically beats short-term purchases, while a purchase is good for those confident they will own the car for years to come.

The issue of commitment

Depreciation aside, there are other obstacles that can crop up when you own a vehicle for a short time. Commitment issues can stem from many different sources. For example, you may think that within a few years your lifestyle or job will no longer require a vehicle. You might face the prospect of a quickly growing family and want the flexibility to upgrade to a larger vehicle. Or you might simply get bored with vehicles quickly and want the flexibility to swap out your current ride for a newer, prettier one. Whatever the case, leasing offers flexible terms and short time commitments, especially when you take advantage of providers with a cancel any time lease or other flexible plan.

Wrestling with the downpayment

A big challenge of buying a car is saving up the funds to cover a downpayment. A single downpayment could cost thousands of dollars, and many consumers struggle to save up that much money. Plus, if something happens and you need a car quickly, you might not have the downpayment money sitting around in your bank account, as Edmunds notes. Leasing usually requires a small downpayment, or in some cases, no down payment. It’s essentially a rental, and it can get you into a car quickly when you can’t afford to buy one. Even if your ultimate goal is to purchase a car on your own, leasing can be a life-saving gap solution.

Considering the quality of your ride

If your main concern is your driving experience, a leased vehicle may be the right solution. Consumers can typically afford to lease a nicer vehicle than they might be able to buy, giving them more vehicle under different terms. For some, cars are more about luxury than function and, if that fits your attitude, then leasing might offer the most excitement and satisfaction.

Guest Post by: Kevin Carey, who is an auto blogger and father of three from New York.

What do you think? Is buying leasing better or what has worked for you?

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