Should You Buy or Lease a Car?| North Loop Official Blog
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North Loop
09 Dec 2020

Should You Buy or Lease a Car?

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Introduction -

The financial implications of buying or leasing a car are many, and that is why it is not uncommon for most people to be confused between the two. There are many pros and cons for each side of the debate, but the key is to find out what would be the best for you based on various factors like personal taste, lifestyle, financial goals, budget and preferences.

In this article, we will talk about the benefits of both the options, so that you can choose the one that is right for you. But before we begin, let us look at the difference between a lease and finance.

Financing a car is essentially taking an auto loan to help you purchase the vehicle. Leasing a car, on the other hand, involves making payments that allow you to use it for a pre-determined time. In other words, leasing helps you rent a car, whereas financing helps you to buy one.

Benefits of Leasing a car -

The benefits of leasing a car are as follows -

Lower monthly payments - The cost of leasing a car is significantly lower as compared to that for buying a new one. It does not involve any upfront sales tax and has a negligible down payment, if at all. However, certain extra charges may come up if you terminate a lease early, have any unrepaired damage or exceed the mileage beyond the allowable limit.

Fewer repair expenses - If you get covered by a manufacturer warranty during your lease term, you don’t usually have to worry about repair expenses. However, the costs for the general maintenance and upkeep of the car do not get eliminated. The amount for auto insurance also needs to be paid by you.

Up to date vehicle - Another advantage of leasing a car is that you can do it every few years. That also means you can enjoy the benefit of driving one with the latest technology, comfort and safety features.

Hassle-free return - Leasing a vehicle does away with the hassles involved in selling a car and getting a fair trade-in value. Once your lease term expires, you can return it or choose to initiate a new lease for a different vehicle. Depending on the manufacturer and the terms or conditions involved, you may also get the opportunity to buy it at the end of the lease term for a pre-set price.

No loan approval required - If you have a low credit score, getting loans for a new car can become difficult. Leasing companies, however, aren’t as strict as lenders because they can easily take the vehicle back on the non-payment of instalments or on violating any lease term. Therefore, opting for leasing reduces the stress of loan approvals or high-interest rates.

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Benefits of buying a car -

Let us now come to the main benefits of buying a car -

Paying less over the long term - Buying a vehicle and driving it for several years can be the most cost-effective way to own a car. That is because the longer your drive it, the lesser it costs. Even though monthly car loan instalments can be more expensive than monthly lease payments, in the case of the former, you can build up equity for the future when you decide to sell it.

No fixed period - The flexibility of selling your car at any given period is a great advantage. As a car owner, you can sell or trade it and pay off any existing loan balance at any time without getting locked into a fixed ownership period like in the case of a car lease.

No mileage limit - Leasing puts a limit on the number of miles that you can drive and often includes astronomical charges on exceeding that limit. However, when you buy a car, you can use it for as many miles as you want without worrying about any mileage limit.

Depreciation - If you buy a two to a three-year-old vehicle, you can get the advantage of paying a price that includes depreciation discount. That is because a car usually undergoes 20% to 40% depreciation within the first few years of usage.

Conclusion -

Choosing whether to buy a car or lease it is a significant financial decision. Therefore, you should take time to compare the payment options on auto loans, research terms and calculate your net outflow over the long term for each scenario.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.