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Have you ever had to decide between whether to purchase or lease a vehicle before?
Purchasing a new car is always an exciting time in life; however, it can also be confusing and time confusing, especially with so diverse types of financing options available.
In February 2017, my husband and I leased our first brand new vehicle. At the time it was the best option for us because we literally have NO credit. Well, he had no credit, I had horrible credit and refused to co-sign which is a totally different post I'll probably discuss at another time. We wanted a truck because we go camping, haul stuff for his parents, and we're planning on moving so the smaller the moving truck we need, the better. So we settled on a brand new Ford F-150. The color is a beautiful blue, and it rides so nicely.
The only thing we regret honestly is not taking more vehicles out to test drive. We pretty, well my husband, fell in love with Jean (Blue Jean to be exact, yes, we name our vehicles, doesn't everyone?) It fits our boys, us, and plus all our camping gear, we can also do the hauling we need if we need.
My husband also researched diverse types of vehicles on websites for months before we even decided to go brand new. We weighed our options, the pros & cons and went to see a friend of the family at a local dealership.
Which brings me to the point of this post….
Should you purchase or lease your next vehicle?
Which option will be better financially for you?
It's important to understand that there is not a clear-cut answer to this question. It really depends on your needs and situation.
Research! Make sure you know what you want, need, and expect from the vehicle you're going to purchase. Whether it's a lease or full on purchase, you need to research. Make sure the website provides a lot of options of vehicles, local dealerships around you, pros & cons, reviews on the vehicles, and more.
When considering whether it would be better to buy or lease, it is important to understand all the terms regarding the lease.
Generally, the lease will be for a specified period and you will probably be limited to the amount of mileage that can be placed on the vehicle. In our situation we only have 12,000 miles a year, if we go over that specified mileage at the end of our lease period, we will be liable to pay the overage, so we try to keep the driving to just my husband using the truck for work majority of the time to save on mileage.
Lease agreements sometimes have finance charges that are owed at the end of the lease agreement. So, it is important to understand that while your lease payments may be less than payments would be if you bought the vehicle outright, you could still be responsible for a sum of money at the end.
You do not build up any equity in a vehicle when you lease it, only when your purchase it.
When you purchase a vehicle out right, and drive it for an extended period, while you do build up equity, that amount declines the longer you own the vehicle. With leasing, you have the advantage of only having to pay for what you use while with the buying option you must pay for everything, regardless of whether you use it or not.
Leasing gives you the advantage of obtaining lower payments and the option of having a new vehicle every two or three years. This can be important to many people because it provides you with the benefit of having the latest safety features on your vehicle and the comfort of knowing you won't have many warranty problems. If you don't care about whether you build-up equity in the vehicle and feel you won't go over the mileage limits then leasing may be the right option for you.
On the other hand, buying the vehicle outright can mean higher monthly payments.
The overall cost to purchase or lease a vehicle is fairly the same in the long run, especially when all factors are taken into consideration, such as mileage overage payments and finance charges. Purchasing also gives you the benefit of owning the vehicle and if you opt to pay off the loan and keep the car, it can mean you won't have a vehicle payment.
You must also take into consideration; however, that when the warranty expires you will be responsible for the cost of repairs. This can be offset when you take into consideration that you don't have to worry about going over mileage limits as with leasing. Additionally, there are no surprise costs at the end as there are with lease options.
When you're looking to either purchase or lease vehicle, think about what you're going to do with your current car. Are you going to trade it in, junk it, or hand it off to one of the kids. If you plan on junking it, you can always sell your vehicle to a company who will take care of it for you.
In the end you really need to give thought to your own situation, needs and desires.
If you're having problems with figuring out how much you can afford regardless on if you purchase or lease, or found out that you need to work on your credit here is a recent post that can help you out!