When deciding to purchase a car most consumers are confronted with the decision
, buy or lease. Making this decision will involve balancing your lifestyle, employment type, and cash flow.
Three major benefits to car leases are:
1. They generally have lower interest than car loans
2. They usually bear lower monthly payments because they involve a buy out at the end
3. A tax write off if used for business
The single biggest drawback of leasing is kilometre restrictions. Most leases only permit you to drive 20,000-24,000 klms per/year and if you exceed this limit, it will cost you big. The biggest benefit to leasing is that leases are very non committal. You have a choice to return the vehicle at the end of the lease and obtain another brand new vehicle.
Leases benefit those who dont accumulate a lot of mileage and are looking for a vehicle that bears a more affordable monthly payment. Alternately they are also a great asset to those who are self employed or use their vehicle for work because lease payments can be written off as a tax deduction if the vehicle is used for work.
Some benefits to financing a vehicle are you own the vehicle at the end and there are no buy outs. Because you own the vehicle there are no kilometre restrictions.
Some drawbacks are your monthly payment and interest rate will generally be higher and if you are using the vehicle for business you will only be able to write off the interest portion of your payments.
If you are planning on being in the same vehicle for many years (more than 6-7 years) financing makes great sense.
Some car loan providers will offer car loans over 72 and 84 months. Do not ever do this. A car is a depreciating asset and so a car loan should never be longer than 36 months in the case of a used car and 60 months in the case of a new car.
Remember that the interest rate is key and the lower the interest rate the better. For more information about car loans and car leases visit http://www.trueassess.com.