Buy Versus Lease- Car Leasing And Purchasing Explained

One of the most common dilemmas of people nowadays is between car purchasing and car leasing

. Should you lease instead of buy? Let us identify the best option based on the need of the clients and by doing so, we can determine whether it is ideal to go for car leasing compared to purchasing. When you look at the customer itself, we can easily address their needs. Though car leasing has its unique benefits, it does not really mean that it will work for everybody. It is not a question whether one is better than the other. It is all about addressing the individual needs of the individuals.

You can say that between car leasing and purchasing, you are actually just looking at two different forms of financing. Let us clarify some things, first, though. Car leasing and renting are two different things. With leasing, you are financing the USE of the car while purchasing is financing the actual purchase of the car. Both have their own unique features and some drawbacks. The financial comparisons, however, should not be your own requirement when looking for options for your car. You have to analyze what is important for you and understand your motivations for having a car.

One concern would have to be your attitude towards cars. Are you someone who likes to change cars every couple of years without any repair risks more important for you than having a car that you can have for the long haul but you have to address the repair risks? Are you willing to pay for the car within a few years or do you like paying low monthly fees? Do you prefer to not pay down payment and enjoy low upfront costs or do you want full ownership of the car? It could be confusing right now to analyze the aspects of car leasing but let us create a more concrete imagery as to what this process actually entails.

With car leasing, you are only paying a portion of the car's cost and that is the amount that you used up for the time that you have been driving the car. As we have already established before, leasing is a financing option and is not similar to renting. You can opt not to pay the down payment and you only pay the sales tax every time you pay your monthly dues. You also need to pay the financial rate which is similar to interest. You might also need to pay additional costs and a security deposit that you do not have to pay when you make a purchase. The first payment starts when you fill out your contract.

If the contract ends, you can opt to send the car back or you could also purchase it for the depreciated value. So, what does this mean? If you make a lease for a car that is worth $30,000 and in 24 months, its value would only cost you around 25,000, then you only have to pay the $5000 difference which is called the depreciation, together with the charges if your contract ends, you have the option to return the car, find a new one and even purchase it if you are willing to do that. The lease payments, as you can see, are made up of two components, the finance and depreciation charges. The latter one is a portion of the monthly payments you make that compensates the company that signed the lease for the amount of value that got lost during your lease. The finance is the interest.

by: Lolita

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