When it comes to financing your next car, deciding whether to lease or buy can be confusing. After all, there are advantages and disadvantages to both options. There is no right or wrong decision when it comes to automobile financing. You should select a financing option that fits your particular financial situation. Following is some helpful information about buying and leasing cars that can help you to make the right decision.
When buying a car, you can finance the purchase price over a certain period of time. In fact, the average car loan in the United States exceeds 60 months. However, most financial institutions offer terms of 24 months, 36 months, 48 months, 60 months, 72 months and 84 months.
There are several advantages to buying a car. In most instances, regardless of the terms of the loan, there is no penalty for repaying the loan early. Once the loan is repaid, you own the car. At the end of the loan term, your financial institution will not penalize you for excessive mileage or damage to the car. The best part about buying a car is you can keep it for years after the loan has been repaid.
However, buying a car is not without disadvantages. When you sell the vehicle, you will only get a fraction of the amount you paid for it. The resale value can be especially problematic if your car is destroyed in an accident. Another potential disadvantage to buying a car is that you will need to provide a down payment. Depending on your credit status, some lenders may require a 20% down payment. Another drawback is that the length of the loan might have to be extended for you to be able to affordable the monthly payment. With longer repayment terms, you’ll end up paying more money for the car over time.
Unlike a car purchase, leasing a car enables you to pay for a percentage of the new car’s value over a short period of time. When you lease a car, you only pay for the residual value of the car, which is the difference between the price of the car and the amount the car is expected to be worth when the lease term is over.
Leasing is a good option if you want to get a more luxurious car for a less expensive monthly payment. Another benefit of leasing is you only keep the car for a short time. In fact, the average car lease is three years. If you enjoy driving different cars every couple of years, then leasing a car is a good choice.
One of the biggest disadvantages of leasing is you will not own the car after the term of the lease is over. You can also incur additional fees if you neglect regularly-scheduled maintenance or exceed the allotted mileage.
Deciding whether to buy or lease a car takes careful consideration. By carefully weighing the benefits and drawbacks, you can choose the option that best fits your financial situation.