When shopping for cars, consumers must determine whether buying or leasing one is the best option for them. Consumers considering a car lease should compare the overall cost of leasing a car to the total cost of buying one. In addition, car shoppers should study the advantages and disadvantages of each option.
Cost of Buying
To calculate the first-year cost of buying a vehicle, a car shopper must add up the down payment, monthly payments, car insurance premiums, any maintenance and repair costs and registration fees (these are usually included in the monthly payment for the first year). A large down payment will result in a high first-year cost for buying a car. The consumer should then calculate the total long-term cost of buying a car based on how long he plans on keeping the vehicle. He must add up the same costs used to calculate the first-year cost. Maintenance and repairs will likely be higher in later years, but registration fees will be lower. The car shopper should also approximate the resale value of the car.
Cost of Leasing
To calculate the first-year cost of leasing a vehicle, a consumer must add up the down payment, monthly payments, insurance premiums, maintenance and repair costs and registration fees (again, usually included in the monthly payment for the first year). Because the down payment and monthly payments are typically lower when leasing, the overall first-year leasing cost is likely to be lower than the first-year cost of buying. To calculate the long-term leasing cost, the consumer must add up the same costs that were used to calculate the first-year leasing costs. He should include any additional cost of a second lease after the first lease expires. Monthly payments will likely increase for the second lease, and he will have to make a second down payment. Registration fees will probably be higher the first year of the second lease. Overall, the long-term cost of leasing a vehicle is usually higher than the long-term cost of buying the same vehicle.
Advantages of Buying
The main advantage of purchasing a vehicle is owning the vehicle after paying off the loan. At that point, a consumer's only auto expenses are gas, insurance, maintenance, repairs and registration fees. Buying a vehicle allows a consumer to drive without worrying about the mileage limitations placed on leased vehicles. Finally, a consumer who owns a car can customize that car to fit his preferences.
Advantages of Leasing
Leasing allows consumers to have new cars every few years. Leasing also increases a consumer's cash flow because it requires a smaller down payment and lower monthly payments. Consumers with car leases avoid the hassle of selling a vehicle at the end of the contract. Finally, leasing allows consumers to avoid being upside down in their vehicles. In other words, they will never owe more than the car is worth.
Other Considerations
A consumer driving a car for business should consider the tax advantages of leasing versus buying. A consumer should also consider any upcoming lifestyle changes. Someone facing a divorce, a move or a new job should view a lease with caution. A person terminating a lease early usually owes all the remaining monthly payments minus any future depreciation.
0 comments:
Post a Comment