Before you make the decision, we’re breaking down the key distinctions between these two courses of action on the blog today.
Deciding whether to lease a new vehicle over buying it outright is a matter of priorities. For some, the choice comes down to the practical financial option. For other drivers, it's all about the emotional attachment to the car.
Leasing draws similarities to renting. A fee is paid to a dealership for the use of a vehicle for a period, usually 36 or 48 months. After the lease is completed, the driver has the choice of returning the car to the dealer or purchasing it at a predetermined price according to the lease contract. That's a lot different from buying a car. Buying it outright means the car belongs to you after the loan is paid off.
Lower Monthly Payments
If you have a tight budget and are apprehensive about the monthly cost of a loan, then a lease could be a great option to take off a bit of the pressure. Often, the monthly payment is substantially less than it would be for a car loan. This can also leave you with a bit more wiggle room to afford a more luxury or higher range vehicle.
A New Car Every Few Years
Depending on the person this could be either a positive or a negative aspect of the deal. Some individuals love that you get to experience that new car feeling when trading in so regularly. But for those who tend to get quite attached to their cars, it can be surprisingly difficult to get rid of a great car just as it's become part of the family. Considering whether you mind making a frequent switch is an important part of this decision-making process.
Many new car brands come with extended warranties, meaning that you will be covered for repairs for the entirety of your lease, bar any modifications/improvements. The risks that come from long term ownership are all but eliminated.
No Resale Worries
No need to worry about haggling and bargaining with private buyers or auction sites. With a lease you simply return the car to the dealership, sign here and there, swap over your old keys for new ones and you're back on your way! The only things you may need to concern yourself with is if there are any end-of-lease fees including those for additional mileage and any excessive wear and tear.
Maximizing Tax Deductions
If your new car is part of your business, a lease will often afford you more tax write-offs than a loan. You can often claim running costs, GST or even depreciation as a deduction.
Leases don't have the same flexibility as buying new. You are bound by a contract that discourages any customization, in fact the finance company may require that you reverse the mods before you return the car, which is both an inconvenience and an extra expense. Also, there are limits on mileage set at the beginning of the lease and an additional fee for exceeding it.
Speaking of fee's, there is an acquisition or initiation fee to be paid to the finance company for handling your case, prior to picking up your new car and a disposition fee for cleaning at the end. These fees can be assimilated into the lease repayments or taken care of on separate occasions. You also have the option to include insurance should you want to see a combined figure rather than keep track of separate avenues. If you are prone to losing track of your bills or leaving a pile of them forgotten on the kitchen table; this could be a helpful option. Similarly, if there is a lump sum amount left at the end of the lease, then the residual amount must be paid in full.
Deciding whether to lease or to buy is a very personal decision. Your repayments and interest rates will be different depending on each person and their circumstances. It’s important to take stock of your finances, consider the points outlined in this article and speak to your accountant before finalizing your contract. There is also a team of financial advisors at our dealerships available to talk you through the whole process when you’re ready to get the ball rolling!