To Lease Or Buy A Car Pros And Cons |WORK|
Leasing allows a person to get a new car every few years. It can keep their payments relatively stable when leasing the same make and model of car over various leases. Leasing also frees the lessee from having to dispose of the car at the end of the lease term.
to lease or buy a car pros and cons
Determining whether you should lease or buy a car depends on a careful assessment of your finances and driving habits. Think about how much you can comfortably afford to pay upfront each month and consider how many miles you spend on the road to figure out the most cost-effective way to hit the highway.
You may hear car leasing likened to leasing an apartment, and there are similarities between the two. When you lease a car or an apartment, you lease the property for a specific amount of time. You and the property owner have a mutual understanding that the assets will be returned in good condition.
Yet there are additional considerations for leasing a car that you will not have when leasing property. Many car lease agreements last two to three years and typically allow you to purchase the car at the end of the term. Car lease agreements limit the number of miles the vehicle can be driven annually, generally between 12,000 to 15,000 miles. If you exceed the agreed upon mileage, you may owe around 25 cents per extra mile.1
Some people choose to lease a car because it allows them to drive higher-end cars for a more affordable monthly payment. Plus, a two-to three-year car lease allows drivers to easily and frequently upgrade their rides.
Leasing helps protect you against unanticipated depreciation. If the market value of your car unexpectedly drops, your decision to lease will prove to be a wise financial move. If the leased car holds its value well, you can typically buy it at a good price at the end of the lease and keep it or decide to resell it.3
Typically, leasing a car does increase your insurance premiums because you are required to purchase full coverage to ensure there are sufficient funds available to repair the car in the event of an accident. The entity financing the vehicle typically requires this because they have a financial stake in the car.5 Full coverage includes collision coverage and comprehensive coverage. These not only provide coverage in the event of accidental damage, but also theft or vandalism, should the car be damaged during the term of your lease.
Another consideration is gap insurance, which covers the difference between the current value of your car versus the remaining balance owed. Many leased cars have this type of insurance factored into the cost.
First, do you like the car? Do you enjoy driving it and does it suit your needs? That may seem like a funny question, but consider your lifestyle. If you leased a small, compact car so you can easily maneuver through traffic, and are moving to a rural area where you may need a vehicle that has sturdier road handling capabilities, you may find the compact car unsuitable for your new location. On the other hand, you may not want to drive a large SUV if you are moving to a congested urban area.
There are various strategies to help save money when buying your leased car, including financing through your bank or working directly with the lender (the creditor that owns the car). If you decide to buy the leased car, explore all your options.
As with most personal financial decisions, the pros and cons of leasing a car come down to a host of factors. Analyze your needs and budget and then shop to make sure you make the right decision for you.
Sources:1 -shopping/5-reasons-buying-your-leased-car-2091582 -leasing/quick-guide-to-leasing-a-new-car.html3 -buying/compare-the-costs-buying-vs-leasing-vs-buying-a-used-car.html4 5 -leased-car
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The main difference between financing and leasing a car is the end result. When financing a car, you are borrowing money from a bank, finance company, or credit union to slowly purchase your car over a certain period of time. When leasing a car, you are paying for the right to use the vehicle for a defined amount of time and miles. The monthly payments on a lease are usually lower than the monthly payments if you bought the same car. When the lease ends, you must return the car unless the lease agreement lets you buy it. 
While the monthly cost you pay for leasing a car is much lower, there are other fees that come with leasing a car. This includes fees for modifications to the car, excess wear and tear, an early termination fee if you terminate the lease early, an acquisition fee, and more.
Like all car financing options, leasing a car comes with its own set of pros and cons. Usually, it is cheaper (initially) to lease compared to purchasing a car through financing. However, payment is not the only thing to consider when looking into leasing a new car. How long you plan to keep the car, how far you plan to drive it, and how good you are at mitigating wear and tear must all be factored in.
Leases typically have shorter durations than purchase financing and appeal to people who value the latest tech and innovation and/or want to reduce maintenance and repair expenses. Tech and innovation are constantly evolving, which means every few years you will have the option to upgrade your vehicle to the latest model or choose something else entirely. If you weren't a fan of the pick-up truck, now's your chance to try the sedan. The relatively short terms on leases can also give growing families an opportunity to acquire a larger, more accommodating vehicle.
Usually, the down payment to secure a lease is lower than the down payment needed to finance a purchase of the same vehicle. Some leases may require no down payment at all. You should, however, still account for taxes and fees that can add to the upfront cost.
Also, you will need to keep an eye on the odometer throughout the duration of the lease. Many leases limit drivers between 10,000 to 15,000 miles a year (may have options to purchase additional mileage upfront at a lower cost). Driving in excess of the mileage allowance will likely incur additional fees. According to the U.S Department of Transportation, the average American drives 13,476 miles a year. You want to consider your driving habits and anticipated changes over the lease term to decide whether the limits are suitable to your lifestyle.
If you decide to lease, your payments may be lower than the payments for financing the purchase of the same car. Instead of covering the interest and principal, as is the case with financing, your monthly payments cover the car's depreciation, which is the value your car loses while it is in your possession, along with rent and other charges. Unlike a home, which appreciates over time, a car's value decreases after leaving the lot and generally continues to do so over time. Since you do not own the leased vehicle, you do not assume the risk of it being worth less than the anticipated residual value at the end of the lease term (closed-end leases only).
When you purchase a car through financing, you own the car. You can generally remodel or customize it as you please and drive it without worrying about going over set mileage limitations. Later, you can trade it in to a dealership or hand it down to your kids. Buying a car offers you some freedoms and flexibility that leasing does not. In the end, it's up to you to decide which method you prefer.
This article is for educational purposes only and provides general auto information. The material is not intended to provide legal, tax, or financial advice or to indicate the availability or suitability of any JPMorgan Chase Bank, N.A. product or service. Outlooks and past performance are not guarantees of future results. Chase is not responsible for, and does not provide or endorse third party products, services or other content. For specific advice about your circumstances, you may wish to consult a qualified professional.
Is it better to lease or buy a new car? Ask most people and they'll probably tell you that car buying is the way to go. And from a financial perspective, it's true, provided you're willing to make higher monthly payments, pay off the loan in full and keep the car for a few years. Leasing, on the other hand, can be a less expensive option on a month-to-month basis. It's also good if you're someone who likes to drive a new car every three years or so.
Since everyone's situation is different, here are the pros and cons of leasing and the pros and cons of buying. Some of these points are financial factors and others relate to your needs and lifestyle. Keep in mind that there isn't always a perfect answer to the question of whether to lease or buy.
You don't own the car at the end of the lease (although there is always the option to buy).
Your mileage is typically limited to 12,000 miles a year (you can purchase extra).
You may find lease contracts confusing and filled with unfamiliar terminology.
You'll pay more in the long run for a leased car than you will if you buy a car and keep it for years.
You could face excessive wear-and-tear charges. These can be a nasty surprise at the end of the lease.
You will find it costly to terminate a lease early if your driving needs change.