Buying vs. Leasing: Which is Right for You?

One of the most important financial transactions that any individual will undertake involves obtaining a new vehicle. The acquisition of said new vehicle can have lasting financial effects for customers and their financial standings. Of course, there are more ways than one to obtain a new vehicle from a dealership or manufacturer. Drivers can choose between either buying the vehicle up-front or leasing it instead.

While this dichotomy does provide drivers with a choice in how they obtain their new means of transportation, it can also breed indecision regarding which choice to make. Both buying and leasing carry their own set of benefits and drawbacks. It is important to understand what these pros and cons are in order to choose the financing method that works best for you. The following are just some of the benefits and drawbacks of buying and leasing a vehicle.

Benefits of buying

Drivers looking to make a long-term investment in their vehicles might be better off buying the vehicle up-front. Rather than leasing new vehicles on a yearly basis, drivers who buy their vehicles get to keep them for as long as they desire. This ownership allows for an increased amount of freedom. After all, when drivers purchase a new vehicle, they can modify it however they like, as long as it is street legal.

Buying a vehicle also yields a potential return on investments, should the driver choose to eventually sell the vehicle. Consumer Reports states that while the vehicle’s value may depreciate over time, a vehicle that you own will ultimately provide you with more equity in the end.

Drawbacks of buying

Nevertheless, depreciation is still a big concern for drivers who purchase a new vehicle. Over time, the value of the vehicle will decrease, even the exact moment it is driven off of the lot. While new vehicles lose value over time, they also cost more up-front if you buy rather than lease. Edmunds reports that purchasing a brand new vehicle requires a much higher down payment than is required for leasing the same vehicle.

Edmunds also notes that, on average, monthly payments for a vehicle that you own are higher than monthly payments for a vehicle that you lease. Attempting to decrease higher monthly payments will often result in an extended loan period, decreasing the amount of money owed each month, but ultimately increasing the number of months that payments must be made.

Benefits of leasing

Keeping up with the latest automotive trends is becoming increasingly important to modern drivers. That is precisely why leasing is an attractive option. Leasing a new vehicle means having access to the latest models from each brand. Drivers who lease also don’t really have to worry about the depreciation of the vehicles they drive.

Furthermore, if drivers encounter any unfortunate accidents on the road, they can rest assured knowing that the vehicles they have leased are under warranty. U.S. News notes that leased vehicles are almost always covered under the standard three-year warranties that auto manufacturers offer.

Drawbacks of leasingOne of the most important financial transactions that any individual will undertake involves obtaining a new vehicle.

Because drivers do not truly own the vehicles that they lease, there are restrictions on what they can do. Automotive manufacturers and dealers will more often than not prohibit any modifications for a leased vehicle, unlike a car that is owned outright.

Other restrictions placed upon leased models involve mileage. Consumer Reports states that most leased vehicles are restricted to somewhere between 12,000 and 15,000 miles a year, making many longer trips behind the wheel impossible.

Finally, drivers who lease a vehicle and end up not liking it will be penalized for returning it early. Edmunds states that while drivers who own their vehicles can get rid of them any time that they want, drivers who lease vehicles will be charged by dealers for ending a lease contract early should they want to get rid of their new ride.

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