Leasing a Car vs. Buying a Car
Loans Canada: The Country's Best Loan Comparison Platform
Buying a car is one of the bigger purchases most people will make in their lives. So, it’s a good idea to do a fair amount of research before you decide on which car, and, more importantly, which financing route you’ll be taking. A common dilemma is buying vs. leasing and weighing the advantages and disadvantages can seem like a lot of work.
The decision between the two options often boils down to your situation, lifestyle, and personal needs. For example, it would depend what you’d be using the car for. If you entertain business clients, then leasing can allow you to have a luxury vehicle for less money up front. Leasing vs. buying doesn’t always boil down to a simple money issue, but if you’re mostly concerned about money, stacking up the pros and cons is a good way to start. Below we’ve done some of the work for you and compiled the most important issues that you need to take into consideration when decided between leasing or buying a car.
Pros of Leasing a Car
The possibility of lower monthly payments
If you are not in the financial position to buy a new car without financing the purchase, then, due to its lower monthly payments, leasing can be very attractive. When purchasing, financing is based on the full value of the vehicle minus your original down payment. On the other hand, leasing only charges the driver based on the difference between the original price and the price after the depreciation of the car. In the end, you’re only be charged the drop in the car’s value over the years you’ve had it.
How to Avoid Car Loan Debt, here.
Always driving a new car
For people who have a low attention span when it comes to cars, leasing is a very attractive option. Leasing can allow you to always have the newest model car with the most recent innovations in technology and features. You’ll also most likely never have to deal with any maintenance headaches if you’re leasing every three years. In the end, you can get more car for less money.
Cons of Leasing a Car
Higher levels of insurance
If you are constantly going to have a relatively new and higher end vehicle, you also have to take into consideration that your insurance costs will probably be quite high. It’s true that you can avoid maintenance costs with a leased car, but some of these costs may be offset by having to pay a higher level of insurance.
Leasing requires good credit
If you don’t have good credit, leasing may not even be an option for you. The overall costs of financing during a lease are always higher than loans because at no point do you pay off any principal. Also, most leasing companies require you to have a healthy credit score along with a stable financial situation.
Pros of Buying a Car
It is easier to budget and plan
When you buy a car through financing, you can calculate exactly how much you will be paying each month and how long it will take you to pay it off. These kinds of certainties are a real asset when staying on track with your budget and planning your future finances (click here to learn how to cut the cost of your car).
You have equity with a bought car
Whether you own or partially own your car, it can still be used for equity depending on your circumstances. If you need to free up some cash, you can always sell your car. Also, if you want some of the perks of leasing, you can also use your vehicle as a trade-in towards a down payment for a newer vehicle.
Cons of Buying a Car
Incurring expenses from mechanical problems
Once the warranty expires on you vehicle, any mechanical issues that may arise from that point on are your responsibility. You have to anticipate that these costs will become more frequent as the car becomes older. Also, when you want to sell the car, you are responsible for the logistics involved with trading in or privately selling the vehicle.
Should you consider purchasing your next car with cash? Read this article.
As soon as you drive a new car off the dealership lot it depreciates in value and it will only continue to depreciate. Also, variables such as accidents and just general wear and tear will depreciate the value. Lastly, with the fast introduction of new technologies to the car market, your car can see quick decreases in its resale value.
Ultimately, the decision between leasing or buying is unique to each individual. If you want to look at things more short term, and want more car for less money, then leasing may be appealing. If you are looking for the security that owning your own car offers, then buying may be more your style. Ultimately, you need to decide on a route that best complements your personal preference while at the same time your financial situation.
Interested in speaking with someone about your auto financing options?
Rating of 4/5 based on 3 votes.
Largest Lender Network In Canada
Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.
Emma, an online insurance platform, allows Canadians to access life insurance in an approachable and convenient way, all from the comfort of their hom...