Car Buying or Leasing: Best Option

When considering car buying and leasing, the choice between the two depends on your needs. Both options carry their own advantages and disadvantages to you that should be weighed equally. Any option for financing a vehicle must fit with how you plan to use the car and your preference for ownership

Leasing is a choice for many vehicle owners who want to experience new or pre-owned cars on more convenient terms than buying. A lease option allows you to get rid of the vehicle at the end of the period, purchase the car or arrange for a lease on a newer car. Leases can run from a period of 12 months up to 60 months.

Leases may be appropriate for a family with a need for 2 cars. In this case, the lease vehicle would serve as a secondary vehicle to be used for errands and other activities that are not driving intensive. All vehicle leases come with mileage restrictions, which cap the number of miles that can be driven in a year. This cap is usually set at 12,000 or 15,000 miles. Any miles driven above the cap are subject to a per mile charge.

Instead of being concerned about a mileage restriction, deciding to buy the car may be a better option. This would be useful for people who travel a lot through the course of business, as in the case of a salesperson. Buying eliminates mileage caps, and if the vehicle is used for business purposes, the ability to deduct mileage expenses or depreciation may exist.

Buying the car can be accomplished either through a direct purchase using your personal assets or by arranging a loan. Taking out a loan to purchase a car is going to require good credit and the ability to make payments on a consistent basis. The loan financing may be arranged either by the dealer when the purchase is made or outside through a bank or unaffiliated finance company.

Choosing whether to buy or to lease comes down to a question of need. Driving habits, vehicle usage and cost are some of the considerations that will go into your decision. Between the two, here are some considerations regarding advantages and disadvantages:

•No long term commitment to the vehicle
•Lower out-of-pocket requirement
•Can receive a newer vehicle at the end of the lease

•Mileage restrictions
•Potentially higher interest rates
•No ownership rights

•Rights of ownership
•No restrictions on usage, including mileage

•Depreciation expense
•Must keep car unless traded or sold