Found yourself choosing between buying or leasing a vehicle? Both options have their own pros and cons, and you should consider these when you finally make a choice. Make decision-making easier for you by keeping the following factors in mind:
#1: Available funds per month
The decision to buy or lease will greatly depend on your cash flow. If you need a ride but struggle to make ends meet on a monthly basis, leasing is a better option for you. The monthly payment that comes with leasing is much lower compared to buying because you are not paying for the vehicle cost; you are only paying for depreciation. On the contrary, if you have much room in your budget for a car loan payment, you should buy. Purchasing a vehicle saves more money in the long run, but it is important to consider what you can or cannot afford at present.
If you are a college student or just graduated from college, and have yet to get a steady source of income, you can lease a car and use the money you save to build a fund that will purchase your next car.
#2: Savings/available money to pay upfront expenses
When you buy or lease a car, you will need to make a down payment. You are expected to put down a hefty deposit to secure an auto loan, preferably 20 percent of the purchase price. Dealers also accept 5 percent. With a lease agreement, the down payment required is lower; in some instances, it can even be waived. If you don’t have savings or don’t have a lot of savings to put down, leasing is a better idea.
Are you going to be driving the vehicle a lot? Or would you be using it every once in a while? You need to know just how much you will drive before you make a decision. Leasing makes sense if you will not drive the vehicle as often, but buying is the better choice if you will be traveling a lot. Know that lease agreements come with mileage restrictions—lessees are usually allowed just 12,000 miles each year. If you exceed the limit, there will be penalties.
#4: Use of vehicle
Is the vehicle for personal use or for business purposes? If you lease a vehicle that will be used for business, you can have a portion of the vehicle’s financing and depreciation costs subtracted from your taxes. If you buy a car with an auto loan, you cannot deduct the interest from your taxes.
The way you will use the vehicle is also worth considering. If you will be hard on the car, buying is better than leasing. Leasing requires you to keep the vehicle in good condition. If you don’t, you will be charged with wear-and-tear fees.
#5: Duration of use/ownership
If you intend to get new auto models every couple of years or you would not be staying here in Portland for long, you are better off leasing. Nonetheless, if you will not be going anywhere soon and you don’t mind driving the same car for long, buying will give you more bang for your buck.