If you are reading this, you are probably at the crossroads where you are not sure which option best suits you like many people. Deciding whether to buy or lease a vehicle is challenging because each option has its advantages and disadvantages.
Do you buy and own the vehicle entirely so that you do whatever you want with it as long as it is legal, or do you need to get from point A to B regularly without committing to one vehicle? Perhaps this guide will offer more clarity on which option best suits you.
Buying the vehicle
The process usually involves getting a loan from the bank, paying the dealership, receiving the vehicle, and paying off the car loan in monthly installments. This process is usually straightforward, especially if you qualify for the loan. The vehicle is yours to do what you want with it even if the bank holds on to the log-book as collateral.
Advantages of buying
- You own the vehicle and can do as you please with it. You can keep it as long as you wish.
- You have a wide range of preferences to choose from in terms of color, transmission, brand, and models.
- You can sell the vehicle later and recover a decent amount of cash, especially if it has good resale value.
Disadvantages of buying
- Your monthly repayments will be high compared to leasing.
- The vehicle depreciates, which means that it loses a significant chunk of its value, which you cannot recover when you resell the vehicle.
- Finding a buyer when you decide to sell will likely not be easy.
Leasing the vehicle
Leasing a car works a lot like how you would rent out a house. The vehicle is not yours, but you are allowed to use it during the lease duration, which will expire, after which you will have to return it or renew the lease for another term.
Advantages of leasing
- The monthly payments are more affordable compared to buying the vehicle.
- Leasing allows you to change the vehicle after two or three years so you can drive the latest model.
- The short lease duration means you can always use the warranty for repairs, which means repairs will be very affordable.
- There is no struggle in finding a buyer.
Disadvantages of leasing
- The car leasing company may limit how much you drive the vehicle or where you drive it. The contract may only allow you to drive between 10,000 and 15,000 miles annually.
- You might have to pay extra fees if you exceed the mileage limit.
- There are additional costs such as gap insurance, which is unnecessary, but it is a good option that ensures indemnity if it is totaled in an accident.
The above factors may help determine which option is ideal for you, in addition to other factors. For example, you might need to lease a vehicle if you are in a new country for a short duration, such as a few months, in which leasing would make a lot of sense. If you want a vehicle to serve your travel needs no matter where you want to go, perhaps buying is a better option.