Tuesday, July 31, 2012

Should I Buy or Lease a New Car?

Leasing vs ownership, man with new car
Source: FreeDigitalPhotos.net

You're faced with the task of getting a new vehicle. Do you buy, or lease? Many people are confused by the idea of leasing a car- some tend to think they could never do it, that it is only an option for business owners. But that isn't the case! In 2011, roughly 25% of vehicle sales involved leases, according to Jesse Toprak, the vice president of Truecar.com. When it comes to deciding between ownership or leasing, each has their own unique benefits and it simply boils down to which suits your needs better.

What is a lease and when should you consider one? 

By leasing a car, you are basically agreeing to rent it for a set duration of time, usually somewhere in the ballpark of several years. At the end of the lease, you can switch to an entirely different and brand new vehicle, or in some cases, you have the option of paying off your current lease and owning the car. With a lease, your monthly payments are going to be much lower as well, sometimes as much as 30-60% than if you were financing a car with the intent of owning it. For example, at the time of this writing, a 2012 Toyota Corolla can be leased for $159 a month (depending on your down payment, though it is generally lower than if you were to purchase a car) and the lease comes with two years of ToyotaCare, which covers most of the maintenance your car will need, as well as complimentary 24 hr roadside assistance. 
If you like the idea of getting a new car every few years, want lower monthly payments, and not have to worry about large repair bills, leasing is definitely an option to consider in your search.

When is buying a car a better alternative?

If the thought of always having a car payment doesn't suit you, you are better off purchasing in the long run. It's also a good idea if you drive a lot, as a lease may end up more expensive than ownership. This is because with a lease, there are generally mileage restrictions on the amount you can travel per year. For Toyota, it's around 12,000, with a cost of 15 cents per mile after. When it comes to overall cost, don't forget to factor in insurance as well- a leased car will in most cases be more expensive to insure, though it is also dependent on the age and driving history of the individual. Of course, with ownership, you also get the freedom to do whatever you want with your car. Feel like modifying it? Adding giant speakers? Selling it? Go right ahead.

Final thoughts:

  • Go with a lease if you want a lower monthly payment, enjoy the thought of driving the newest cars every few years, and not having to worry about regular maintenance.
  • Be sure to check out and stay current with available lease specials- some are much better than others, but only offered for specific vehicles.
  • It is better to buy a car if you drive more than 12,000 miles a year and are wanting an investment for the long run.

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