Is it better to buy or lease a new car?

Until relatively recently, most major car manufacturers did not really encourage leasing vehicles to private customers, it was a part of the business that was reserved more for companies and fleets.

That has changed significantly, and today every major car company is actively promoting the idea of ​​leasing a vehicle, making it a viable option for individuals rather than buying a car outright.

Leasing a car should really be thought of as a long-term rental. Many people like the idea of ​​leasing their car, simply because it allows them to own one in a way that they might not otherwise be able to afford.

The obvious downside to leasing a car is that you don’t own the car, you don’t own the vehicle title. On a practical level, this means that you can’t really make many modifications or changes to the vehicle, and you have to return it at the end of the lease period.

The decision to buy or lease a vehicle follows especially from the above distinction. For many, the idea of ​​leasing has a number of benefits that go beyond vehicle ownership or title ownership.

A car lease is a fixed, long-term contract, typically up to 72 months. There is a fixed monthly payment cost, which is largely based on the depreciation in value of the vehicle over the term of the lease.

There will be other conditions, such as a fixed mileage allowance for the term of the lease, and possibly also on an annual basis.

There is normally an option to purchase additional miles, and the costs of this must be specified in the terms and contracts of the lease.

As well as having access to a vehicle that the person would not otherwise be able to own, there are usually also significant financial benefits to leasing a car. Many manufacturers offer very specific financing deals for car leases, often at 0% interest, assuming your credit score is good enough to qualify for it.

With any lease, all costs must be specified and clarified at the beginning of the lease period. This includes what is commonly known as the lease termination agreement. These are the costs associated with wear and tear on the vehicle.

The manufacturer’s intent is to put the vehicle in a condition that is appropriate given its age and mileage. If the car has excessive wear beyond what is considered appropriate, the renter will be charged to cover the difference.

These charges can be significant, but the lease must specify in exact detail how they are calculated and on what basis the charges will be made.

Whether you buy or lease a vehicle, the same credit checks will be run against an individual and an assessment will be made based on your credit score. This will determine whether the credit company or dealer finance will lend the individual money and on what basis.

This will affect the decision itself, the length or period of the loan agreement, the interest rate charged for the duration of the loan, and the amount of the down payment.

The choice between buying or leasing is not really a financial one, although leasing is usually a much cheaper option. The real decision comes down to a more emotional one, where the individual weighs the pros and cons of the property and the related costs, as opposed to a form of loan, which after a few years means they have to pay it back.