If you’re in the market for a new or used car, you might already know how prices have skyrocketed since the pandemic. While vehicle costs have cooled recently, committing to a car loan may only be for some. There are various reasons to own vs. lease your car, and it’s important to pick the right option for your financial situation and preferences!
Keep reading to learn more about the pros and cons of both options and get more information before you make a big financial decision this year.
When is a good time to lease your car?
Although the leasing lifestyle isn’t for everyone, there are a few pros to leasing your car instead of financing it! For starters, leasing a vehicle allows the driver to get a new car every couple of years (when their lease is up) and have relatively stable monthly installments. These installments can be predictable and affordable depending on the type of car you are leasing, which is an advantage for many drivers who aren’t ready to commit yet!
Speaking of committing, that’s another perk of leasing a car. You don’t have to commit to purchasing a specific make or model. Instead, renting a car allows you to test various makes and models – or keep the same one if you like it! When driving a leased car, you take advantage of (typically) free maintenance and covered repairs.
Cons of Leasing a Vehicle
Now that you know more about the perks of leasing a vehicle, the next step is to understand the drawbacks. Once your lease is over, that’s it—the car goes back to the dealership! The money you spend on the vehicle every month will never go towards owning the vehicle, so that is something to keep in mind. Although you can’t build equity on the vehicle during your lease, you may be offered the opportunity to purchase the vehicle from the dealer after the lease ends.
Another drawback of leasing a vehicle is that you need to maintain control over the car. You can’t sell it, trade it, etc. You also may not be able to modify it, and you can only drive it for a certain number of miles per year. Most leases have an allowance of 12k-15k, but it can be more or less per year depending on the terms of your lease agreement. If you exceed this amount, your monthly payment can increase, or you will be expected to pay the dealer per mile you drove over the allotted amount. If you must drive a lot throughout the year, leasing a vehicle may not be in your best interest.
When is It a Good Time to Own a Car?
Buying a new car is often an exciting experience! Out with the old and in with the new wheels. When you finance a new or used vehicle, you are building equity with the payments that you make towards your car loan. You get to keep the car as long as you want if you keep up with your payments and pay off your loan!
Another perk of purchasing a vehicle instead of leasing it is that you can drive your vehicle as many miles as you want! There are no mileage limits tied to your vehicle. You also have the ability to trade in or sell your car as long as it has sufficient market value. If you want to have more freedom with your vehicle and drive as many miles as you want to, then purchasing a car may be a better option than leasing it.
Cons of Owning a Vehicle
Unlike leasing a vehicle, you don’t need to worry about wear and tear charges that may come up during your leasing period. But, the flip side of that perk is that you are responsible for paying for your car’s maintenance and repairs (unless they are covered under warranty). Before you purchase a used vehicle, it’s important to consider the fact that your car is no longer under warranty and you are financially responsible for the vehicle unless your insurance policy covers the necessary repair.
Another con of owning a vehicle is that the payments can often be more expensive than leasing a vehicle. If you are planning on financing your vehicle, it’s a smart idea to have a bigger down payment in order to reduce your principal loan amount. The less money you borrow from an auto lender or a financial institution, the lower your monthly payment will be. But, that requires having a sizable down payment upfront.
Unless you purchase the car outright, you have to keep your budget in mind if you want to get a new or used car. Whether you’re financing a vehicle or paying off title loans in Ohio, you’re expected to keep up with your payments if you want to maintain access to your vehicle until the loan is paid off. Otherwise, the potential consequence of a defaulted loan is vehicle repossession, which can negatively impact your credit score. Only take out a car loan that you can realistically afford to pay back!
How to Get the Best Price for a Lease or Car Loan
If you are going to lease a vehicle, you should shop around and go to different dealerships. The terms of your lease may change depending on who you decide to work with, so make sure that you are getting the best deal possible for the make and model that you want to drive! There are penalties for breaking your lease early, so leasing a car isn’t a decision that you want to make lightly.
If you decide to take a different route and you want to get the best deal for a car loan, try to follow these steps:
- Make Sure that Your Credit Score is Up to Par: Your credit score plays a vital role in your loan’s interest rate and your eligibility for a car loan! Make sure that you can do what you can to boost it before you submit your application. For example, you can try to lower your credit usage to increase your available credit! That can potentially increase your score.
- Find the Best Price: If you want to buy a used car and you do not shop around to find the lowest price for the make and model that you want, you are doing yourself a disservice! You can research the car that you want to purchase on websites like Kelley Blue Book or Edmunds to find the market value of similar vehicles with comparable mileage.
- Haggle and Negotiate: Although some dealerships do not let you negotiate or haggle, it is important to test your luck! Try to talk them down a few thousand on the price or get extra warranty coverage if you can. It may not always work, but it’s worth trying!
Regardless of whether you decide to get a car loan or lease a vehicle, it’s important to get the most bang for your buck!
