Lease Or Buy A Car: Things To Know

It can be a difficult task to decide whether to lease or buy a car. Each option has benefits and disadvantages, so you'll have to take some time to consider your personal situation to decide which option is best for you. Here are some things to know when deciding whether to lease or buy a car.

Usage. Leased vehicles usually come with yearly mileage limits, usually between 12,000 to 15,000 miles. Overage charges can range from 20 to 50 cents per extra mile, so if you plan to do a lot of driving, buying may be the smarter option. In addition to mileage limits, a lessee also has to be aware of any excess wear and tear he or she may put on the vehicle. If you are prone to treat your car like a race car, leasing could prove to be quite expensive.

Modification. Leased vehicles are not usually allowed to be modified. Modifications include things such as repainting a car, installing aftermarket parts, or upgrading the sound system. If you want to tweak your ride, look to purchase it.

Payments. The up-front costs for a lease are usually less than the up-front costs for a purchase, as leases require little to no down payment. A lessee may have to pay a security deposit, but it should not cost nearly as much as a down payment for a purchased vehicle. Additionally, monthly payments for a lease tend to be lower than monthly payments for a car loan, but a buyer has the option of eventually paying off the car and being free of monthly payments.

Depreciation. Car's depreciate. When you lease a car, you are paying for the time you use it and its estimated depreciation over that time. When you're looking to lease a car, you'll want to find one with a high residual value, as a higher residual value should translate into lower monthly payments. When you  buy a car, you should consider its possible rate of depreciation, especially if you plan on selling it in the future.

Taxes. When you buy a new car, you have to pay taxes on the full purchase price. You can save money on taxes by leasing a car, because you'll only be paying tax on the amount of time that you use it.

Maintenance. When a car's manufacturer's warranty expires, a buyer will have to pay for its maintenance out of his or her own pocket. Since new car leases typically run together with a manufacturer's warranty, lessees can expect to have the car's maintenance covered by the warranty.

Owning/Selling. If having ownership of the car does not matter to you, then a lease is a viable option. If you do want to own the car, you'll have to buy. Also, if you are a car owner and you want to get a new car, you may be faced with selling or trading-in your old vehicle. A person who leases does not have to worry about the hassles of selling and trading-in, as he or she can just lease another car once their current lease term expires.

Either leasing or buying a car can prove to be the best option for a certain person, depending on his or her situation. Use the tips in this article to decide which option is right for you!