Choosing a new car can be thrilling but you might be undecided in terms of wanting to lease a car or purchase a car. The following aims to shed some light on the differences between the two options, which should help you in deciding whether you want to follow the car and leasing route or the purchasing route.
When you take out a bank loan to buy a car and organise monthly repayments, those payments will include interest you need to pay on your loan. As your monthly payments progress, the amount you owe the bank becomes progressively smaller, and in turn the interest you pay becomes less because the amount you're paying interest on is reducing. As an example, you get a 10,000 loan and buy the car, and after a certain number of months you have managed to repay the bank 3,000 plus interest. Now you are not paying interest on 10,000 but instead on 7,000.
The payments on a lease car are different to those for a car purchase because you are paying to use the car, not buy it. The use of the car includes its depreciation cost (how much value it loses during your use of it), mileage that exceeds your lease agreement and excessive wear and tear that happens whilst you're using it. When you lease a car from a vehicle leasing company, the company has already bought the car before leasing it to you, which means you pay interest on the car's purchase price (for instance a purchase price of 10,000). However, since with car leasing you are paying for the use of the car and not the purchase of it, that 10,000 amount will never decrease so you will be paying interest on 10,000 for the duration of your lease agreement.
A great advantage with a car lease is that when your lease agreement expires you simply hand the vehicle back to the car leasing company and it is their job to sell it. During your lease period the monthly payments are probably going to be higher than the monthly payments to pay back a purchase loan but the lease has the advantage that when it expires you can choose to lease another new car, so you can drive new cars every few years. Maintenance costs throughout the lease period should also be relatively low since the lease car will be new at the start of the lease.
Due to the depreciation cost, more likely than not you will make a considerable loss if you buy a car and sell it several years later. Maintenance costs will also likely increase as your car gets older. One of the benefits of a purchased car over a lease car however is that you can modify it since you own it but you are not allowed to make modifications on a lease car.
When you take out a bank loan to buy a car and organise monthly repayments, those payments will include interest you need to pay on your loan. As your monthly payments progress, the amount you owe the bank becomes progressively smaller, and in turn the interest you pay becomes less because the amount you're paying interest on is reducing. As an example, you get a 10,000 loan and buy the car, and after a certain number of months you have managed to repay the bank 3,000 plus interest. Now you are not paying interest on 10,000 but instead on 7,000.
The payments on a lease car are different to those for a car purchase because you are paying to use the car, not buy it. The use of the car includes its depreciation cost (how much value it loses during your use of it), mileage that exceeds your lease agreement and excessive wear and tear that happens whilst you're using it. When you lease a car from a vehicle leasing company, the company has already bought the car before leasing it to you, which means you pay interest on the car's purchase price (for instance a purchase price of 10,000). However, since with car leasing you are paying for the use of the car and not the purchase of it, that 10,000 amount will never decrease so you will be paying interest on 10,000 for the duration of your lease agreement.
A great advantage with a car lease is that when your lease agreement expires you simply hand the vehicle back to the car leasing company and it is their job to sell it. During your lease period the monthly payments are probably going to be higher than the monthly payments to pay back a purchase loan but the lease has the advantage that when it expires you can choose to lease another new car, so you can drive new cars every few years. Maintenance costs throughout the lease period should also be relatively low since the lease car will be new at the start of the lease.
Due to the depreciation cost, more likely than not you will make a considerable loss if you buy a car and sell it several years later. Maintenance costs will also likely increase as your car gets older. One of the benefits of a purchased car over a lease car however is that you can modify it since you own it but you are not allowed to make modifications on a lease car.
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Learn the contrasts between buying a car and a car lease before making a decision. Go to Leasing Options for great deals on your car leases
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