When you buy a new car you have two basic options: you can buy it or you can lease it from the car company. Leasing a car is when you “rent” the car for a certain amount of time, paying a monthly payment on it but eventually returning it when the lease is up. It’s the same concept one would find when deciding whether to rent or buy a house. It all depends on what is best for you.
Leasing
When you lease you only pay a portion of the cost of the car, the portion is for the time you use the car, the length of your lease. While you are leasing you will pay a monthly payment and a financial rate, which is the lease’s interest rate. Lease is similar to renting, except it is also like a loan that you have to pay an interest rate on. When you first lease a car the dealership will estimate how much the car will be worth, how much it will depreciate, during the length of your lease. You will then pay the difference between how much it is worth when you lease and how much it is expected to be worth when your lease is done, and you pay the finance fee. An advantage of leasing is lower monthly payments.
Buying
If you decide to buy a vehicle, you will be paying the entire cost of the vehicle. When you decide to buy you will have to get an auto loan, unless you can afford the car outright, in order to pay for the entire cost of the car. You pay the principal and interest on the loan and the car is yours. You do not have to worry about returning it, how many miles you drove or what kind of condition the car is in when you return it. Monthly payments for buying are higher and your car will depreciate in value pretty quickly.
What is the Best Option?
Which is better? Leasing is for you if you like to have new cars every couple of years, want lower monthly payments and do not need to have ownership of the car. If you like ownership, want to keep the same car for a while and do not want to worry about how many miles you drive or the condition of the car, then buying is for you. Buying is the more popular and less complicated route. When deciding what the best route is for you, you should take a look at your finances to make the decision.
