Auto Lease vs. Purchase: Which Is Right for You?
, by Rob Kaufman
Monetary Resources are just one consideration when deciding between an auto lease and financing an auto purchase.
When most people are considering whether to lease or purchase a car, their first thought goes to the financial aspect of the decision. "Will my monthly payments increase or decrease with an auto lease?", "Will I save money in the long-term if I purchase my automobile?", "Does it pay to have equity in my car?" No doubt these are important questions, but as you continue to read, you'll see there's more to making this decision than money alone.
The reasons for one person to lease a car might be different for another. For instance, if your business requires that you always have a luxury vehicle for entertaining clients, leasing a car could help make this happen. However, if you don't drive much and tend to keep the same car for many years, it might be best for you to purchase a new or used vehicle. Again, it all depends on your individual wants, needs and finances.
Pros and Cons of Leasing a Car
|☺||Lower monthly payments as compared to a similar purchased vehicle||☹||Your yearly mileage is limited|
|☺||Little or no down payment||☹||You don't own the car at lease's end|
|☺||Low repair costs||☹||Typically pay more in long-term|
|☺||New car every few years||☹||Charges for normal/excessive wear-and-tear|
|☺||Easy trade-in at lease end||☹||Early termination fee|
As you can see, the majority of the pros and cons above relate to finances, which is most likely why this is the first topic that comes to mind when considering a lease versus purchase. Still, there are other considerations... Convenience, for example: do you want to have to worry about staying within an annual mileage limit? Peace of mind is another: would you feel more comfortable having a new car every few years or not having to concern yourself with the hassle of trading in or selling your car? These are personal preferences and, in the end, should be part of the decision-making process.
Pros and Cons of Purchasing a Car
|☺||No mileage limits||☹||Higher down payment|
|☺||Money savings over long-term||☹||Higher monthly payments as compared to a similar leased vehicle|
|☺||Sell your vehicle when you're ready||☹||Repair costs not covered by warranty/ after warranty expires|
|☺||Use car as trade-in on next purchase||☹||Trade-in/Selling problems if vehicle needs repairs|
|☺||Add any customization you want||☹||Cash is tied up in a depreciable asset|
As mentioned above, the decision to finance a purchase or to lease a vehicle is an individual matter. The factors that are of priority to you and that also impact you and your family the most are the ones that will help sway your decision.
FINAL NOTE: Whether you decide to lease or purchase, your FICO® Score will play an important role.
There are more than 10 different auto finance calculators at myfico.com. They are a great resource for credit education. Use them to find out anything from what vehicle you can afford to how much depreciation should cost you .
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