Is a Lease better than Buying a Car?
Getting a new car is a wonderful thing. Who hasn’t seen those incredible commercials with the latest model being shown like it’s some kind of high-speed jewel. The car is all shiny and you know that it has that nice brand new car smell. These commercials are great and they do exactly what they’re designed to do as far as I’m concerned; the first thing I want to do is just go out and get that car… and drive it fast.
If you have seen these commercials, then you will also notice that whenever they quote the price, they will only be giving you the lease price on this vehicle. Car dealers do this because in a way they’re kind of showing you that it is this easy to come and pick up this wonderful car and essentially start driving it today. Most of these lease offers involve no money down and what seems to be a relatively low monthly payment.
But is a lease a good thing? There are definitely some positives when you consider the proposition:
– If you do own a business you can usually deduct far more from lease then you can from a car that you own completely.
– Leasing is definitely less of a pain. Your usually getting the best car and you’re replacing this car in about three years time for a brand-new model again.
– You are usually spending far less money per month. If you buy a car then you will be paying more a month and that is why in a commercial car dealers love to show the lease price instead of the actual monthly payment that you would be making if you were to buy this vehicle.
But it’s not all wonderful:
- The biggest difference between buying a vehicle and leasing one is that when you buy a vehicle after a certain period of time you will own that vehicle. In this sense you can think of it like buying a home or renting an apartment; when you buy a home there will come a point when you won’t have to pay anymore because you will actually own this home while if you rented an apartment you will be paying for the rest of your life. The thing with the car though is that it won’t take you 30 or more years to pay off, so after five years or so, you will own your car completely. The longer that you can hold onto this vehicle, the more saving that you can provide for yourself. Imagine trying to pay I lease of $210.00 a month for the next 40 years.
- a lease is great if you have the money to always get the best and you don’t need to look for a sale. Most people, myself included, need to look for bargains in order to try and save whenever we can. When you get a car on the lease, you are essentially paying the highest price possible for that car and for whatever expenses your accrue with it. When you get a car on a three-year lease for example, what you are essentially doing is paying the depreciation of that car over those three years. The biggest depreciation with a car occurs within the first two or three years so essentially you are paying the premium amount for whatever car you have. Buying a car that is a year old, never driven but sat in the dealership for year, will therefore be a far greater deal than paying the top price for a vehicle year after year for the rest of your life.
- Your insurance payments will usually be less over time when you own your own vehicle. One of the big things that tends to lower the price of the insurance that you pay is the expense of your car. If you have an expensive new model of car then you will be paying top dollar for your insurance. But if you’re able to keep this car for five years or more, your insurance will start to go down as a result of the depreciation value of your vehicle. The car is still good, things still work great on it and if you get yourself a good model you could have it for a very long time, but the insurance company will charge less because they will consider it to be less valuable.
- remember that when you lease a car you don’t own that car. If you ever find yourself in financial difficulty, and for some reason can’t make the payments on your car, then getting out of this lease is going to cost you. You will never be able to sell this car and you will essentially be tied into this contract which comes with a penalty if you try to get out.
- As I said if you own a business a lease might be a good idea for you. I am not saying that I lease is a bad thing, you just need to really think about it before you get into one. Think about how much you will be using that car; a good rule of thumb is to only consider a lease if you will be putting more than 10,000 miles on this car every year that you are leasing it. It is also good to note that if you are going far over this mileage, there will most likely be a mileage penalty in the contract. But if you drive way less than this, you’re essentially paying the dealership to keep their car.
- Finally remember to consider the fact that if your car is stolen or it gets totaled, your insurance will only reimburse you for the market value of the car. This market value might not cover what you still owe on the lease. You can avoid this by paying extra to your insurance which is usually called “gap coverage” but that means that you will be paying substantially more to ensure your leased car.
As you can see, leasing a car might look really awesome in that commercial but it’s not a practical thing for the average person. Most car commercials are designed for the impulse buyer; get your blood boiling and get you really emotional about the fact that you really need this shiny new machine. The lease offer makes it seem like you could just go there and sign a small contract and walk away with your dream. Unfortunately unless you are very financially comfortable or own a large business where a lease becomes profitable, it is far better to buy your car.
My personal advice is that you get last year’s model. These cars are still new and they are not driven, they just have had a years’ worth of depreciation. This depreciation can mean big savings for you.