When it comes to choosing cars to buy, financing options are a key part of your final decision, but should never be the decisive factor. Since your new car is an extension of you, it should match your personality and lifestyle, not just your financial situation. And before you say that new cars are not for you, read this article to find out why buying new is always better.
Generally speaking, many people choose to finance their new car, but if you think of leasing, take into account the following factors.
Are You Into New Cars?
When comparing a new car to a leased car, keep in mind the key difference between the two choices. When you are buying a car and financing it, you actually get to own the vehicle, with each payment increasing the percentage of the car you own. When you lease a car, however, you are basically paying a monthly fee to rent the car for a certain pre-decided length of time, usually three years. In other words, instead of borrowing the full purchase price of the car, you are only borrowing the amount the car will depreciate over the term of the lease
For some, this can be a positive situation, since one of the most attractive aspects of leasing is the fact that you can upgrade to a newer version after a certain amount of years as you are not locked into paying off its full price. On the other hand, some feel that they are paying a monthly cost that isn’t going towards ownership of the car, similar to renting an apartment versus mortgaging one. Again, depending on your personality, you may prefer to lease a car like the Ford Mustang and switch to a new model in a few years or you may want to keep your new car for the long term, deciding to finance and buy it instead. You can read more about the whole rent vs. mortgage debate right here; it might just help you make up your mind.
Do You Drive Your Car Often?
Since a car lease is generally between two and four years, chances are you will be fully covered by a warranty during your lease term, giving you a peace of mind. Once the lease is up, you can trade in your car for the latest model. If you drive often – i.e. you take your kids to school, go on road trips or have a long commute to work, then actually owning a car like the GMC Acadia or Chevy Traverse is better.
If there is a higher chance of wear-and-tear, then don’t lease a car. If you don’t drive often, or you want the car mainly for business trips, then leasing might work out better for you. Over the long term, there will inevitably be maintenance costs that need to be calculated and considered. For the most part, however, a person who drives responsibly and pays attention to routine maintenance is going to come out ahead if they buy.
How Much Do You Make a Month?
While you have to make sure your new car is a good fit for your lifestyle and personality, finances are something that can’t be ignored. You may find plenty of cars that seem perfect for you, but if the monthly payment is over your budget, you might as well not even bother with a test drive. Leasing a car costs less per month than financing one, on average. Hence, if your monthly income is low, then leasing is the better and safer option. However, just because it’s cheaper, don’t make the mistake of spending more on a lease instead of buying a car.
To make the right decision, please consult Unhaggle’s free dealer cost report. It provides all the numbers you need to find out when leasing is more appropriate than financing and vice versa.
Other Things You Should Know
The key difference between a leased car and a car you finance is that you have no ownership over the leased car, whereas you have an increasing percentage of equity in your financed car with every monthly payment you make. Thus, you can’t sell a leased car, so if you decide to get out of a lease before the term is over and break your contract, you might have to pay cancellation fees. If you own a car, on the other hand, you can sell it in a pinch and get back some of your money, making it cost less to buy in the long run.
When it comes to making a final decision, keep in mind these factors to make a decision as to which method makes the most sense for you. Examine the benefits of each choice and remember that your choice should be dictated by what makes you feel the most comfortable and which fits your needs best. In both cases, don’t rush into a decision and take your time.