When it comes time to get yourself a new ride, it is easy to be overwhelmed by your financing choices. Sure, if you have the money in the back, then it is always best to just pay for it outright instead of taking on debt. However, most of us aren’t that flush with cash and we have to decide between taking out a loan to finance the new automobile or leasing it. Growing up, I used to think that car leases were only for those who are bad at math, but as I’ve gotten older I’ve discovered that’s not the case. So, if you’re trying to determine which is the best for your needs, let me see if I can help you out.
Buying vs Leasing: What To Consider
In order to know which makes the most sense for your financial situation, you need to ask yourself a few questions. By taking the items below under consideration, you will be able to make a more informed decision on how you’ll be paying for those new wheels.
What Are Your Driving Habits?
Are you the kind of person who like to take road trips when it’s time for vacation, or are you the type of person who pretty much only drives to work and around your local area? Car lease agreements have a yearly mileage allotment – typically between 10,000 and 15,000 miles – and if you exceed that limit, then you pay a per-mile penalty once the lease is up. So, if you drive more than 10,000 miles per year, it is safe to say that leasing is not for you.
What’s Your Financial Situation Like?
You typically need less money to put down on the vehicle when you are leasing versus financing. Additionally, the monthly payment amount is often lower for a lease than for a financed vehicle. So, if you have less money to put down or if you need the lowest possible payment, then a lease is definitely the better choice for your current money flow.
How Long Do You Want To Keep The Car?
Most car leases are for a two to four year period, after which you have the option of turning in the car or buying it from the dealership. If you like getting a new automobile every two to four years, then a lease is a good choice. But, if you like to drive the same car for several years, then you’ll likely come out ahead financially by financing it. The only possible exception to the latter scenario is that if the car is worth more than the buy-out amount when you turn it in (due to you driving it a lot less than expected), then you can come out ahead by leasing following by doing the buyout. And as a general rule of thumb, the longer you own the same car, the better off you are when financing versing taking a lease.
How Rough Are You On Vehicles?
Are you the kind of person who takes good care of a vehicle? Or do you end up with damage to the interior from your pets, kids, or other negligence? Car leases typically have wear-and-tear fees that you have to pay if you turn in the vehicle in less than pristine condition. So, if you don’t keep your rides in tip-top shape, skip the lease and go the financing route.