You need a car to get from point A to point B, but is it better to finance or lease one? We’ve recently discussed when leasing can be a good idea, but is it the best option overall or only in certain cases? We’re here to answer that question.
Investing in a vehicle is a big decision, and you shouldn’t treat it lightly. Of course, you’ve figured out the make and model, perhaps it’s a Toyota Highlander. Then you’ve confirmed the colour. Now, it’s time for the big question: do you want to buy it… or do you want to lease it? Each side presents its own pros and cons: Leasing enables you to swap cars after a predetermined year, but you’ll have to pay fixed installments that might cost you more over time, whereas financing may offer you more freedom in the long run, despite the temporary interest. It all depends on your lifestyle and cash flow, but here are seven other reasons why financing may just be the more practical option.
Better long-term investment
New car buyers have something car leasers don’t, and that is equity. Sure, they might have paid a bit more upfront and in taxes, but the purchase may be worth it in the long run when they choose to put a down payment on a new vehicle. Financing becomes a better strategy if you would like to continue owning a car in the future. The bottom line for buyers tends to be lower. Leasers must remember that they are just renting the vehicle. Like the college student renting the basement suite in someone’s house, leasers would have to pay a fixed amount regularly to continue driving the vehicle, so the break-even point is reached pretty quickly, though the amount is commonly lower than what you pay to finance a car. Still not convinced? Check out Unhaggle’s Auto Loan Finance Calculator to do all the math yourself!
Longevity (if committed to proper maintenances)
The appeal of leasing a car is that you’ll get an opportunity to upgrade once the terms are over. It’s true that you’ll be driving the best (2-5) years of a vehicle if you choose to lease it, but realistically, cars today are built to last an average of 10 years—if it is properly maintained and cared for. Not that you have to run a car to death, but financers have the ability to control the car’s longevity with $0 monthly payments. Should they choose to trade it in, that is also an option since they now, as mentioned before, have equity to assist with the down payment of a new one.
Customization
Generally speaking, dealerships prohibit drivers from customizing leased cars in any permanent way. I would be hesitant to even put family decals on the rear windshields. Of course, financers have the freedom to make whatever customization choices they like as long as they are legal. That can mean a new stereo, souped-up engine, custom paint job and even the addition of tail fins, if that is what you fancy.
Sell to upgrade
Once again, I would like to highlight the advantages of being able to sell to upgrade rather than returning a lease car in exchange for a newer model. Financers have the liberty to sell their vehicle whenever they feel like it. To some this may feel so obvious that it doesn’t constitute as an advantage for buying. But imagine the flux of life, it’s hard to plan for this year let alone five years from now. Leasing demands commitment, but buying enables freedom, and that can mean new possibilities.
No mileage restrictions (leasing may charge you 15-20 cent extra per mile)
Another problem leasers have that financers don’t is the possibility of running over the mileage restriction (approximately 15,000 miles per year) set upon leasing a new vehicle. Due to residual value, dealerships will set these limits. Lower mileage equals high value, so leasers are often tempted by choosing the lower number without actually acknowledging how much they would actually drive a vehicle for. This may cause problems down the line, where many leasers don’t realize they are over the limit until they return the vehicle and witness the fees. Financers of course do not have to worry about this problem, though they should always be aware of their car’s mileage status… it’s just a good thing to know.
No wear-and-tear fees
Drivers know that cars are built to break over time. Wear and tear is bound to happen even if you choose to only drive it on Sunday mornings. Lease vehicles, upon returning for upgrade or termination, will need to be free of dents, scratches, cracks, tears and anything else that compromises the vehicle’s integrity, otherwise the leasers will be subjected to a wear-and-tear fee. You can learn more about wear-and-tear payments in this article. Although wear and tear is something all drivers should be concerned about, financers don’t have to worry about those expensive fees.
No costly termination processes
Terminating a lease is a huge hassle, and worse, it can be costly. If you are sick of your leased vehicle and would like to get a new one before your contract ends, good luck, because you’ll essentially need to buy out your previous lease before you can move forward with your new vehicle. The process is designed to keep people from simply deserting their lease while payment is still required, thus a hefty charge will be attributed to those who attempt to simply walk away and break the lease. It can end up costing you the same amount just to keep the whole term.
