Leasing vs buying a car

What is meant by leasing a car?

Car leasing is also a type of financing: here, one hires a car from the manufacturer for a fixed period—generally, it’s of a few years and uses it until the tenure ends. He has to pay the down payment to have the car rights and then he keeps paying monthly installments, and once the tenure ends—the car goes back to the real owner. In leasing, you have no ownership of the vehicle, and so you have to pay less than buying a car.

What is meant by buying a car?

Buying a car means to purchase it by paying the MSRP of the vehicle. There are no terms and conditions associated with it. In this, the buyer has full ownership of the car.

What is meant by financing a car?

To purchase a car—the buyer must have the price of the car which she is supposed to pay to the dealer. But if for some reason, she does not want to pay in cash, and then she can finance the car by getting a car loan from the bank or a finance company.

How to buy a car via financing?

First of all, you should file for a pre-approved loan because when you go to the dealer with a pre-approved loan, you have more probability of getting more bankable car finance. After it, ask the dealer for a test drive in your most suitable model. Once you get your best-negotiated price and satisfied with the test drive, read all the documents well, sign them and finalize the deal.

car lease
car buying

How to lease a car?

To some extent leasing is similar to buying as in this also you have to finalize your vehicle, then search for an economical & reliable lease dealer, you have to do some financial discussions with him like monthly payment and insurance. Before tying up the deal read all documents astutely and comprises gap insurance at the initial stage.

What are the advantages of leasing a car?

Various advantages of leasing a car over purchasing a car are:

  • Leasing offers approximately 30% lower monthly payments than buying a car.
  • Don’t panic about the maintenance as it is contractual obligation of the dealer to handle every repair.
  • You have to put down lesser payment than in buying.
  • You can switch your vehicle with the latest one by just paying off your final fees and getting another new car.
  • In leasing, you are supposed to pay lesser sales tax because you are paying lesser money as compared to buying.

What are the advantages of buying a car?

Various advantages of buying a car over leasing a car are:

  •  Once your loan is paid off, then you are the one & only owner of the car.
  • You can customize the vehicle as per your interest or need.
  •  Mileage is unlimited. You are free to drive as much as you want.
  • Despite having a bad credit score as compared to leasing customers with good credit score, you are more likely to get a loan for buying a car.
  • You can get money on the buying of a new car by using the old one as a trade-in or by selling it.
  • There are chances of refinancing your car loan.

What are the disadvantages of leasing a car?

Here are the disadvantages of leasing a car over purchasing a car:

  • It offers no ownership. You can drive as long as you are paying the monthly payments.
  • You can’t customize the vehicle as you have to return it in the same condition in which it was taken.
  • Mileage is limited. generally,  it is 10,000 – 15,000 miles per year. If you surpass that limit then you’ll have to pay for those extra miles.
  • To get a leased car you must have your credit score much above a good score
  • You are required to cover gap insurance.
  • When the contract is over you will get no money for returning the car. Instead of it, you may have to pay by clearing some final fees or for extra miles or for any body-damage.

What are the disadvantages of buying a car?

Here are the disadvantages of buying a car over leasing a car:

  • Because of the higher down payments in comparison to the leased cars and interest on monthly installments the cost of a purchased car becomes pricier.
  • You can’t easily switch to a new one as you have to invest too much time in getting old one’s trade-in value.
  • It’s your headache to restore those steep-rated repairs when the warranty period of your car is over.
  • In case of buying, there are chances of paying much more sales tax as it is placed on the complete price of the car.

Comparison of Buying Vs. Leasing

Buying Leasing
Complete ownership of the vehicle. You can customize the vehicle.

You can drive your car as much as you want. There is no limitation.

It’s not necessary to keep the credit score high in order to get the loan. Average is enough.

You’ll get money when you sell your car.

No ownership of the vehicle. You cannot customize the vehicle.

You cannot drive your car as much as want. There are limitations.

It’s necessary to keep the credit score high in order to get the loan. Average is not enough.

You’ll get no money when you return your car. Instead you’ve to pay the final fees as well.

FAQ

Q: Is leasing a used car a good idea?

A: Leasing a used car at low cost, in a good condition with low miles and with authorized dealer is not a bad idea.