Purchasing a car is a big decision to make and one that can have a huge impact on your finances, but there are two options. We weigh up the differences, and pros and cons of buying vs leasing.
Leasing – the Pros and Cons
Leasing a vehicle can be a good option, and it does come with some benefits. Not only will you be able to drive a new car every few years, but your monthly payments will be less than loan repayments, which means that you might be able to afford a better model. Also, you won’t need to deal with selling an old vehicle when you’re ready for a new car.
But leasing a car does come with downsides. The big issue for many people is that you won’t own the vehicle. Take note that most vehicle leasing companies will charge a wear and tear fee, which you will need to pay when returning the car at the end of the lease period. Also remember that if you drive above a certain set limit, most leasing companies charge an amount per kilometre.
Buying – the Pros and Cons
Your other option is to buy a car, and obviously this has its pros and cons too. If you buy a car you will own it, which means that when you’re ready for a new vehicle you will be able to sell the old one. However, you won’t get the same amount of money back that you paid for the car, since cars depreciate over time.
The downside is mainly financial – either you will need to pay for the vehicle up front, or you will have to take out a loan, and monthly bank loan repayments will probably be a lot higher than the monthly payment to lease a car.
If you decide to lease a car, you will pay a monthly instalment to a car dealership in order to use the vehicle. At the end of the lease term, which is usually around two to five years, you will return the vehicle to the dealership, at which point you will have to decide if you want to lease again.
If you decide to buy a car you will either pay the full price in cash or finance it, and then the car is yours. If you want to buy another vehicle you would have to trade in your current car, and you may have to pay off your bank loan if you have one.
By Wanita Wallace