Introduction

The debate between buying and leasing a car has been raging for at least a decade but increasing numbers of people are opting for a leased car option. This article will examine the advantages and disadvantages of both options.

1. Capital Cost

Leasing is a very attractive option for those who simply don’t have access to the immediate capital to own a car outright. Of course buying a used car is a great way of overcoming this barrier as a lower capital outlay is required in the first instance. This option is not really available however for those wanting a new vehicle.

Leasing on the other hand is neatly packaged in monthly payments that won’t leave a huge dent in your savings in the short term.

2. Hire Purchase Cost

Of Course if you can’t afford to pay for your car in one single payment, hire purchase is an easy way to source your own vehicle. Whilst this may seem a good option for those determined to own their vehicle it can also be expensive. Finance agreements at dealerships often have high percentage rates of interest between 20-25%, meaning that you will be paying substantially over the odds in the long term for your vehicle.

Whilst leasing may not result in you owning a vehicle outright at the end of the agreement, it does cover many motoring related costs that a finance agreement with a dealership just won’t touch.

3. Depreciation

Whilst buying your own car may seem attractive most suffer from high depreciation costs (a fall in value) in their first 2 years which can wipe about 20% of their value.

Whilst leased vehicles suffer the same effect you won’t notice it so acutely in your monthly payments, the only people who will be directly effected will be the leasing company when they come to sell the vehicle at the end of the leasing agreement. For this reason depreciation can actually work in your favour on leased vehicles because most leasing agreements last between 2-3 years in duration at the end of which you are often offered the option of purchasing the vehicle. If you decide to exercise this option you won’t be as significantly affected by the fall in value of the vehicle.

4. Associated costs.

After buying your vehicle you still have to pay out separately for insurance, car taxes, test charges to ensure the vehicle is safe, breakdown cover, cost of repairs, costs of auto theft or damage. Whilst these costs are also factored into monthly car leasing premiums, the leasing company will have more purchasing power than any individual, which means that these overall costs are still likely to be lower and are automatically covered by the terms of the lease. In addition car leasing companies offer a courtesy car if your main vehicle is off the road, something that you don’t always get with independent insurance cover on a car that is owned outright.

5. Extended Test Drive

In essence car leasing is an extended test drive over 2-3 years, during which you can get a good feel for the vehicle and decide whether or not to purchase it at the end of the leasing contract.

Buying a car does not afford this luxury, so if you buy it and find it’s not right for you, the only option is to sell, which can be a costly decision.

6. Contractual Agreements

Perhaps one of the biggest benefits of owning your own car is that unlike leasing there are no contractual agreements (unless you buy on HP). This means that if your financial or family circumstances change you won’t be locked into a contract. Some car leasing contracts have heft penalties should you terminate or change the contract part way through.

Summary

This article has attempted to compare and contrast issues linked to buying or leasing a car. It has drawn attention to the fact that there are number of benefits and disadvantages to both options which will have differing effects on an individuals purchasing decisions.

Author

Wherever we go, it is important that we have our own vehicle to provide the transportation we need. We might have gear and stuff that could irritate some passengers if we are going to commute using public transport or taxis. Therefore, the best possible way to avoid the inconvenience is to buy a new car. However, we might not have the money to purchase a brand new car and therefore we just have to consider car leasing. There are many car leasing providers available today. Some offer many services that would encourage many people to avail of their car leasing services so potential customers should be wise in choosing the right source for renting a car. There are many things to consider before leasing with the providers but one must know first what car leasing is all about.

Car leasing is the arrangement between customers and car leasing company y which enables the former to hire a car for a particular duration of time and specific mileage. The customer then pays a preset monthly installment to the company that owns the car. A car leasing company often presents a wide variety of options on finance for the new cars available and even the used cars that suits their personal or business arrangements. Many major auto manufacturers offer different kinds of car leasing services; they even provide van leasing and car repairs or maintenance for a very affordable price. You can choose whatever payment plan that suits your budget. Anyone can get the benefits from leasing a car. One of the benefits is that the customer can choose their favorite car and be able to ride in it, which is everybody’s dream. There are cars today that are very expensive but because there are car manufacturers that provide such service, people get to experience the ultimate ride of their life. It is very crucial for customers to understand that to be able to choose what is the ideal car lease option for them; they should be able to compare the available services of one provider to another. Select also the one that fits your personal or business requirement.

You should be aware of the things that need attention before getting involved in a car leasing agreement. First, you must determine the length of the contract. How long do you need the car? Is it for only a few days or is it for a few months? Such things should be specified. Generally, car lease takes place for 18, 24, 36 or even 48 months. Next, you should see to it that the negotiation that is going to take place is reasonable. Companies that offer car leasing typically buy vehicles in great numbers so they should be able to give the customer an affordable price. The residual worth of the rented car should also be considered. Selecting a car that has a good value at the closing stages of the contract will bring down the monthly payment. Then, many agreements have penalties for those who terminate the contract earlier than what is agreed upon so you should be able to analyze the clause in the contract that states the things about this. Also, you should be able to estimate the car usage precisely because there are some companies that apply excess charges for mileage. There are also the wear and tear clauses that most contracts specify charges for. You should read those carefully because you may be paying some of the wear and tear rates when you return the rented car. Frequently, many manufacturers do not allow changes by the customer to the car. If the customer does so, he or she will pay the expenses in restoring the car to its original state.

Before availing of the car leasing services, one must be able to know what to do before doing so. There are many types of leasing options available today especially in the internet. Opt for the one that gives you excellent advantages for your personal or business leasing needs.