Should I Buy or Lease My Next Vehicle?
Whether it’s your first time taking the plunge into vehicle ownership, or you’re a veteran on the car lot, there are many things to consider when selecting a new car or truck. In addition to choosing the right vehicle for your needs and getting your auto financing in order, there’s also the all-important “buy or lease” question to answer. As is often the case, when trying to decide which option is better for you, the answer is “it depends.” We’re not trying to be coy, even personal finance experts can’t come up with a definitive answer because every person’s financial situation is so unique.
There really is no “right” answer when it comes to the choice between leasing and buying your next vehicle. In fact, when faced with making that choice, you may even be surprised to discover that the real answer for you is keeping your current vehicle and driving it into the ground. Here are a few of the advantages to buying, leasing and even for sticking with what you know.
Advantages of Buying
One of the most gratifying times in a person’s life is the point where they realize they no longer have to make a payment on something because they own it outright. The paperwork that comes with discharging a car loan is one such proud moment in a person’s life. Imagine what not having a car payment would look like when you’re planning your monthly household budget. It’s probably one of the most significant line items in that budget, right after housing.
One of the key arguments against owning your car is the one of depreciating assets. If you’re looking at your car as an investment, the math will never work. Cars decrease in value from the second you drive off the lot, and they keep on heading down from there. But that leaves us wondering, are there really people who are hoping to make money on their vehicle when they’re done with it? Or are the vast majority of people buying a car because they need reliable transportation to get them to the activities that are part of their daily life? We’re pretty confident that most would-be car owners fall into the latter category.
If you drive less than the average Canadian (18,000 kilometers per year), buying is probably the best option for you, especially if the term of your loan is five years or less. At that point, there will still be a lot of life left in your car and you will be able to put the money you used to spend on auto financing into more leisurely pursuits. Or you could do something crazy, like use it to start paving the way to a more comfortable retirement. You know, whatever floats your boat.
Advantages of Leasing
The monthly payment of leasing a car is often lower than the one that comes with buying the exact same make and model. A lower payment isn’t the only advantage that comes with leasing a vehicle. Lease terms are generally two to four years in length, a time period that is generally considered the best time in a vehicle’s “lifespan” because it is generally still covered under warranty and your car is still brand new. When the lease is up, you simply return the car and get another brand new vehicle. Sounds great, doesn’t it?
The main drawback to leasing, of course, is that you will always have a car payment, and someone always has a say in how you operate your car. There are usually strict mileage limits on leased vehicles as the leasing company has an investment to protect. You may be required to take the car to a specific place for regular maintenance, thereby limiting your ability to shop around when it comes time to service your vehicle.
Long term, even with a higher upfront cost, you’re going to come out ahead financially by buying your vehicle, especially if you’re able to defray some of the vehicle costs by doing your own maintenance. These lowered costs of vehicle operation are going to be especially important if you are hoping to buy your vehicle with bad credit auto loans.
Keeping the Vehicle You Know
If you already have a vehicle, there may be one more option to consider, and that’s doing the necessary repairs to keep it on the road for a little longer. You’re probably disappointed right now, especially if you have your heart set on a shiny new car. If you own your vehicle outright or only have a little to go before it’s paid off, there are a lot of advantages to keeping it. For one thing, if it has been a while since you purchased a new vehicle, you may have forgotten how much of a dent a car loan payment can make in your monthly budget. There’s also a good chance your insurance rate will be higher on a newer vehicle.
You may have someone telling you that it’s not worth it to spend more than the car is worth on repairs, i.e., don’t spend $4,000 to repair a car that is only worth $3,000 on the open market. That may be true for someone with a lot of disposable income, but if you are already cash-strapped, you have to recognize that you’re not going to be able to replace that car for what it would cost to repair the old one. Even if your current vehicle costs that much in repairs every single year, you’re still only hitting the breakeven point when compared with a newer car purchase or lease.
Leasing, buying or keeping a vehicle may seem like something outside the realm of possibility if you have a poor credit history. That’s not necessarily true, and it’s especially not the case for the customers of Auto Loan Solutions. Try our easy-to-use online application form to see if you qualify for auto financing, and then join the online community on our Facebook page to learn more about how to lower the costs of owning your new vehicle.
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