Buying a car can be overwhelming. In fact, the pleasure of getting a new car can be quickly clouded during the financing decision-making process and price negotiations. Besides price haggling, many car shoppers are plagued with the decision to lease or buy. Which financing decision is right and why? This article will focus on rationalizing that choice.
For those who have never leased a car, leases can seem confusing, complicated and geared more toward business owners (who might deduct the expense) or individuals who simply can’t afford car payments. But these perceptions may be outdated. Before eliminating leasing as a financing option, car buyers need a solid understanding of the different purchasing processes.
By far, the greatest benefit of buying a car is that you actually own it once purchase is made. Implied in this benefit is that you are completely free of monthly car payments. The car is yours to sell at any time, and you are not locked into any type of temporary ownership period.
The most obvious downside of buying against leasing is having to part with the whole money all at once. Although one-off, the initial out-of-pocket cost is higher when buying a car.
Perhaps the greatest benefit of leasing a car is the lower out-of-pocket costs when acquiring and maintaining the car. Leases require little or no down payment, and there are no upfront sales tax payments. Additionally, monthly payments are usually lower, and you get the pleasure of owning a new car every few years.
With a lease, you are essentially renting the car for a fixed number of months (typically 36 to 48 months). Therefore, you pay only for the use (depreciation) of the car for that period, and you are not forced to absorb the full depreciation cost of the vehicle. Leasing a car will never put you in an upside-down position, trust me!
Leasing also provides an alternative when buying a car is not an option. Averagely, a brand new car cost up to N4,000,000. Sometimes or most times, we aren’t ready to let go off that N4million all at once, that’s if at all we have it.
Finally, for business owners, leasing a car may offer tax advantages if the vehicle is used for business purposes.
By leasing a car, you always have a car payment, and if you don’t like that prospect, then leasing is probably not right for you. As long as you lease, you will never really own it. However, depending on your type of lease, when your lease term is up, you either hand the keys over to the car dealership and look for another vehicle, or finance the remaining value of the vehicle and go from making lease payments to loan payments.