In our last post here on the Van Norman Law Blog, we introduced the topic of car shopping. For many people, this is an important topic. After your house, your car is probably the second most expensive thing you will ever buy. You want to make sure you make the right purchase and that you get the best deal on a vehicle that is a perfect fit for you and your family. Of course, you also want to make sure that you stay within your budget. Perhaps it would be beneficial for you to lease a car, rather than buy one. Today, we are going to discuss just that.
What is the primary difference between buying and leasing a car? Well, when you buy a car, you OWN it. This is not true for leasing. When buying a car, you typically finance through the dealership or acquire and outside loan. Buying almost always requires a much larger down payment than leasing. Every dollar you spend on car payments brings you one step closer to owning the vehicle outright. Eventually, you will reach a point when the car is paid off and you will no longer have to make car payments! There are some downsides to buying. First, the cost of repairs and maintenance will rise as the car gets older. Second, the value of the car decreases dramatically the moment you buy it.
When leasing a car, you enter into a long-term rental agreement. A typical lease will last 2-3 years. Leasing has a number of advantages over buying. First, operating costs are almost non-existent as the dealership will handle repairs and maintenance. Second, you will never be stuck with an old car because you will have the opportunity to lease something new every few years. The primary drawback of leasing is that you will ALWAYS have a car payment. You will never fully pay off the car. Finally, leasing agreements come with mileage limits. If you drive beyond the mileage limit, you will have to pay for every mile over. This can get very expensive.