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Buying v. leasing a car

Date posted:  1/10/17 02:30:00 PM If you're thinking about getting a new car, you must first decide whether to lease or buy.

If you've decided to buy a car, there are several aspects to consider. From knowing when to buy a new car to knowing what kind of car is right for you, there are several components that will impact your final decision. Consider these factors before making a final decision:

A look at leasing
Leasing a vehicle has advantages as well as a few drawbacks. U.S. News & World Report noted that instead of buying a new car, you can lease and finance the depreciation during the lease term, in addition to fees. Once the term is up, you simply return the car. This is an appealing option if you want to spend less money on a newer model or are considering a car lease for small business.

Leasing is also a good choice if you need a car for a short amount of time. Leases typically last around three years or however long the bumper-to-bumper warranty lasts. Unexpected costs will also be covered when you lease, which is beneficial. However, you'll be required to maintain the vehicle and document the service throughout the entire lease.

While there are several benefits to leasing, there are also downsides. Some of these include:

  • Mileage restrictions.
  • Mileage overage fees.
  • No equity in the car.

Another consideration to take into account is whether you have good or bad credit. While it will impact whether you buy or lease, your credit score will have a more powerful influence if you decide to lease a vehicle. Consider pulling your credit score a half year before you decide to buy or lease to correct any errors and improve your credit in advance.

Becoming a buyer
Bankrate noted that buying a vehicle is often a better choice in the long term. There are benefits to leasing, but the lack of equity and permanence can be seen as a disadvantage. If you lease, you'll need to make continual monthly payments, but if you invest in owning a car, you will cease to make payments once the vehicle is paid off, pointed out Business Insider.

"Repairs are another factor you must consider when deciding whether to buy or lease."

In addition, owning a car provides you with the freedom to trade-in or sell your car should you find you no longer need a vehicle. With a lease, you are locked into a contract.

While buying a vehicle has benefits, it is more expensive upfront. Not only is there a down payment required, but monthly payments are also higher.

Think about repairs
Repairs are another factor you must consider when deciding whether to buy or lease.

"Since most leases last for three years, your car will always be under warranty, so you won't face major repair bills," said Scott Michalek, a senior financial adviser with Wescott Financial Advisory Group in Philadelphia, according to Bankrate. "On the other hand, if you own your car, you can scratch it, dent it and rip up the interior without worrying about it. If you lease a car, you must return it in excellent condition. Otherwise, you'll have to pay a penalty."

Repairs are sometimes necessary when you lease a car, which, depending on the warranty, can get expensive. However, if you own a vehicle, repairs, specifically cosmetic ones, are up to your discretion.

Know what's right for you
When it comes down to it, it's critical for you to make a final decision based on what's right for you and your unique financial situation. Weighing the pros and cons first will help you settle on the best decision.

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