Leasing vs. Buying: Which is better?
Many think leasing is the best option when purchasing a vehicle because you can get a bigger car for a smaller monthly payment. Sometimes, choosing to lease seems like less of a commitment. The added perk of being able to trade in for a newer or different car from time to time is seen as an unmatched bonus. Here is the one thing we suggest you remember about leasing a vehicle:
NEVER lease a vehicle for personal use!
The expenses add up and unless you can write them off as a business expense, you, the lessee, will never come out ahead.
Think of leasing a car the same as renting a car, only instead of two or three days, it’s for 24-36 months. Unfortunately, when you return the car to the owner (lessor), your old car will NOT be waiting for you. Leasing carries many fees at the agreement signing, often including:
- your first month’s payment
- a refundable security deposit
- your last month’s payment;
- other fees for licensing, registration, and title
- a capitalized cost reduction (like a down payment)
- an acquisition fee (also called a processing or assignment fee)
- freight or destination charges
- state or local taxes.
You are also responsible for additional mileage fees over the set limit (typically around 12,000 miles per year or less), excessive wear and tear on the vehicle, and usually, a standard fee when returning the vehicle.
You may think that by leasing you’re able to get into a more “expensive” car than you otherwise could, but in the long run, you’re shortchanging yourself by putting much more of your hard-earned money into the pockets of leasing company executives.
Keep in mind that automobiles are meant to get us from one place to another, not to make us feel better or give our ego a boost (such emotions, if they do happen, are only temporary and superficial). And remember that a car is a WANT, not a NEED. If you consider your vehicle necessary for your physical survival (a true “need”), then it becomes very easy to justify getting a newer car, a larger car, a nicer car, a shinier car, one that’s cooler, faster, louder, roomier, stronger, cuter…. You get the picture.
So, stick to a modest car that serves your needs and helps you keep your finances on track.
When you do get to the point of buying a vehicle, remind yourself that car debt is BAD DEBT (meaning you lose money)… You will almost NEVER sell your used car for anywhere near the same amount of money that you’ve put into it. So, minimize the amount of money you borrow to buy a car. You can still find a reliable, enjoyable vehicle on a modest budget and your finances will be glad you did.
Do You Have Questions About Whether You Should Lease or Buy a Vehicle?
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If you need more information on how to decide between leasing and buying a vehicle or have any other questions about improving your personal finances, please feel free to comment below and we’ll answer as right away!