If you are planning to buy a new car and are confused about whether you should finance it or lease it. Which option will be the most cost-effective or which option gives you more value? So follow this post and you can know what is best for you.
First of all, ask this simple question to yourself.
Question: Do you want a new vehicle every 3 years?
Answer: If you love to buy a new car within 3 to 5 years then leasing is the best option for you and if you want to keep your car for more than 5 years then leasing is not for you.
Question: Are you using this car for business use?
Answer: While leasing a car for business, A portion of the amount can reduce your taxes. Which you pay as depreciation and other financing costs for leasing the car. Buying a car does not offer this option.
Question: How much do you drive the car?
Answer: If you drive less than 12K miles in a year, then leasing will be the better and cheaper solution and If you drive more then buying is a better alternative than leasing.
Question: Are you willing to spend on maintenance and repair charges?
Answer: When you lease a car you will never have to pay for major or minor repairs like brakes, tires, and batteries, etc. But when you buy a car you have to bear all the expenses by yourself.
Let us understand with an example of how leasing will cost you less money:
If you Buy a Car
Suppose you plan to buy a $30,000 car that requires some minimum down payment to take, which we would consider to be around $5,000 and you plan to pay your EMI within 5-year, your loan installment will cost you around $450 to $500 per month which depends on your bank how much EMI and interest rate they would charge, here we assume your EMI as $450 per month.
So you will end up paying approximately $32,000 for the new car, including the down payment and monthly installment.
If you Lease a Car
In the case of leasing the car, you will have to pay a very nominal down payment of around $2,000 to take the same car on lease. You pay $350 per month in the first three years of the first lease term and $385 per month for the next two years. During the second lease period. So in leasing a car for five years, you’ll only be paying $23840.
But the problem here is that at the end of your lease you will either need to buy another car or lease a new car again. That’s why buying a car offers you extra values, compared to leasing a car in the long term.
