Car Leasing vs Buying: 4 Factors to Consider
When faced with the choice of a lease or buy a car, many people find it difficult to decide.
When you buy a new car, you need to have a significant amount of cash on hand for the down payment, not to mention a stellar credit record to get approved for a loan. With a lease, you’ll have lower monthly payments. But at the end of the day, you still won’t own the vehicle.
However, more and more people are now choosing vehicle leasing over buying their own, even with the fear of being trapped in a cycle of unending payments with it. In fact, the rise of car leasing is not showing signs of slowing anytime soon.
Still, making a decision about this matter should not be taken lightly. After all, you’ll be spending your hard-earned cash, either way.
To help you make the right decision that fits your budget and lifestyle, here are four factors you should consider first before choosing to buy or lease a car:
1. Your preference and needs
When it comes to making the most cost-effective choice between buying or leasing a car, you’ll have to take your needs into account first. If you plan to keep the car for a few years, you have the choice of leasing or buying pre-owned vehicles.
However, if you’re someone who wants the latest features and technologies in vehicles, leasing might be the better option. This is because leasing gives you the freedom to do what you want without busting your budget.
Whichever the case is, the bottom line is that there’s no universal rule that applies to all. When it comes to leasing or buying, it will always depend on your preferences and needs. Knowing how you plan to use the vehicle and what you need from it will surely help you decide.
2. Value for money
A product’s price is probably one of the first things you look at before making a purchase decision. This also applies to automobile purchases.
But when deciding between leasing or buying a vehicle, what you must consider is what is the most cost-efficient choice. You see, there is a big difference between the cost versus cost-efficiency: the former referring to the price you pay while the latter speaks of the value you get for the amount you shell out.
The general cost of leasing a car is much lower than buying one. Aside from needing little to no down payment, you also save on upfront sales taxes. Plus, car lease payments are up to 60 percent lower than monthly vehicle amortization, even if both are the same type of vehicle.
Moreover, leasing is also believed to offer greater value for money. The car leasing industry in the United Arab Emirates is the perfect example of this.
Based on data from a car rental company in the country, UAE residents only spend Dh1,770 monthly on car leases within a 12-month period. Compared to the Dh1,946 they would otherwise pay in a car loan for a purchase, that definitely gives them significant savings.
Also, the report noted that people who lease vehicles rather than buying them also make the most out of what they pay for, especially if they only need it for a short period. Think of it like this: Why would you pay for the entire box of pizza if you would only eat two slices of it?
Another major factor that needs to be considered in making a choice between buying and leasing is the vehicle’s rate of depreciation. Essentially, depreciation occurs as the car logs more miles when you drive it. This will then amount to reduced resale value.
For car owners, depreciation is usually equivalent to getting less than what they paid for the vehicle when it is time to sell it. Unless you score a classic or luxury vehicle, the older your car gets, the less its price is.
If you choose to lease a car, you don’t have to deal with this since you’ll be paying for a fixed amount every month according to the expected depreciation rate during the term of the lease. This means you would never shell out any amount higher than what the car is really worth.
4. Loan approval
Probably one of the most challenging things to accomplish when you wish to drive a vehicle is to get your loan approved. Unless you’re wealthy enough to pay for it without going broke, leasing a vehicle can help you achieve your goal without having to go through the grueling loan application process that doesn’t even guarantee approval.
Remember that having a less-than-stellar credit history can cause you to get disapproved for a car loan. In some cases, you may be offered a loan but with an exorbitant interest rate that you most likely cannot afford.
With car leasing, you won’t undergo such an exhausting process since leasing companies aren’t as strict. After all, they can easily take back the vehicle if you fail to make payments or violate any of the terms in your lease contract.
It’s time to make a choice
When deciding on something, you have to have the right knowledge about every factor that can affect the outcome of your choice. Consider the factors listed in this article to ensure that you don’t regret your decision when picking between leasing or buying a car.