Leasing vs Buying a New Car, Which One is Better?
The question perhaps shouldn’t be whether buying a new car or leasing a new car is better, but whether to buy a new car or lease a new car is better for you. A lot depends on how often you want to change your car, how much you drive, what kind of car you buy, and how you feel about the whole concept of ownership. To help you decide which might be the best way for you to go, here are some details about leasing and buying a new car.
Main differences between buying and leasing
A major benefit of buying a car for many people is the fact you own it outright, which means no finance company has any sort of hold over it. There are no payments to make each month and you're free to drive your vehicle when, how, and as much as you want. When you lease a car you're effectively embarking on a long-term hire agreement. But if the differences were really just that simple then why would anyone choose a lease, and why would it even be a consideration to go for a lease over a more traditional forms of auto finance? The answer is actually achingly simple really; cost.
Costs of leasing a new vehicle
There are a number of costs to consider when thinking of leasing a new car, but the really good news is a number of them are avoidable, potential costs. The monthly payments and the upfront deposit are the most obvious costs of leasing, although even a deposit isn’t always required. Those potential costs come in at the end of a lease when the vehicle is being returned to the leasing company. For example, if you've driven more miles in the car than maximum stated in the terms of the lease you agreed at the start, there will be a charge of so many cents per-mile. Also, if there's damage to the vehicle, or if the condition as a whole isn’t what's considered acceptable wear and tear by the terms of the agreement, there will be a charge for putting that right. But if the condition is good and you've stayed with the stated amount of miles, these charges will not be applied.
Costs of buying
Most will assume the price you pay for the vehicle to drive it away is all you have to think about with buying, right? Wrong! Although some costs associated with buying may not be as obvious as they are with leasing, they still exist. If you cover an awful lot of miles and the condition of your car is poor, it will be worth less when you eventually sell it or trade it in. That then brings us to the biggest cost associated with buying a vehicle, which is depreciation, or the amount the vehicle's value drops, compared to the purchase price while you bought it. Three years after buying new, depreciation can account for as much as 60 percent or more of the original purchase price. Depreciation is of no concern whatsoever to those who lease.
Although we've said depreciation doesn’t matter to those who lease a new car, in a way it does because that's effectively what you are funding. However, the leasing company is buying yours and hundreds or thousands of other vehicles new, and selling them at the end, so the depreciation won’t be as heavy as it would be for a private individual. If you're only going to be keeping your car for a few years, leasing will also keep you covered by the manufacturer warranty. And unless you do a lot of driving, wear and tear items like exhausts and tires probably won't be an additional cost to worry about either.
For more detailed information about leasing versus buying and for professional advice about which might be best for you and your circumstances, don’t hesitate to get in touch with our experts here at Lamb Ford Sales right away.