A great deal of thought goes into getting a car. While some might rely on a vehicle’s dashing good looks or staggering amounts of horsepower to justify its purchase, there are the select few who look at the acquisition of a vehicle under a more financial light. Shining in the financial spotlight are two options that will forever be competing with one another when it comes to automobiles: the lease vs. the purchase.
While this is an extremely subjective topic, there are definite pros and cons to each and you shouldn’t dismiss one just because of the initial cost or because of the long-term commitments. Buying a car is hardly comparable to buying your first home, but let’s try and bridge the gap anyways; there are certain situations in life that call for renting a one-room basement apartment, and there are other times in your life where signing for a mortgage on a four-bedroom, two-story house is the best option. See my point?
There really is no right or wrong answer here; it’s about situational solutions based on individual needs, so keep that in mind.
leasing
While some might see leasing as throwing money away, others see it as an opportunity to obtain an otherwise unobtainable dream: their own car. Technically, the car is never truly your own, but it is in your possession for a few years, at which point you can bring it back and leave with another brand new car. Now, doesn’t that sound inviting? No stressful selling process or harrowing mechanical bills (thanks to dealer warranties), just a hassle-free ownership that ends as pleasantly as it begins.Pros
Get a better carWhen it comes to buying a car, there’s always the fantasy and the reality. The fantasy usually consists of high-powered engines coupled with luxurious interiors, stylish designs and outlandish price tags; whereas reality often means mundane and practical with little excitement, but a price tag that won’t see you eating Kraft Dinner three times a day. But consider this: The payments on a brand new 2007 BMW 328i 36-month lease are $400/month versus $917/month on a 36-month finance. Does the dream seem real yet? Leasing a vehicle means you are only paying the amount the car is worth for the duration of the lease; whereas purchasing a vehicle means you are paying 100% of the car for whichever time frame you choose. The lease will always be the smaller amount, therefore the smaller monthly payment.
Manufacturer warranty coverage
Having a car that runs well and requires little maintenance is often on top of the list when considering purchasing a brand new car. However, it does happen that even new cars have trouble along the way. If you choose to lease, you are also choosing to have the manufacturer remain responsible for workmanship and material defects in the automobile; they remain responsible for the structure and integrity of their vehicle. The terms will differ for each manufacturer; most will offer a time frame such as three years or 36,000km, whichever comes first, but the coverage is the same. While the same guarantee is offered to a financer, promotions and special offers often ensure that a leaser will never pay for replacement parts for the duration of their lease, and they usually get to give the car back before any major issues occur.
Car is always new
Who wouldn’t want a brand new car every couple of years? No matter how much you love or want a vehicle, the grass is always greener somewhere else. The automotive industry is constantly shifting, changing and upgrading. New models are popping up every year, so why settle on driving the same car for years and years? A lease allows you to own a car for a few years at a time knowing you’ll be left with zero responsibility at the end with the freedom to move on to the next mean machine. Leasing could be considered a form of dating -- just be careful you don’t fall in love.
Cons
No money backGetting a brand new car every couple of years without having to worry about selling your current ride seems great but, on the other hand, it almost seems like a waste to pay for something that’s never really yours. There you are pouring thousands of dollars a year into this thing on monthlies, gas and upkeep and what do you have to show for it in the end? Besides the memories, there’s not a whole lot left. Just like a needy girlfriend, a lease will suck you dry and leave you with absolutely nothing in return. There are the select few who can sell their leased cars for a profit (buy-back plus interest), but in a market where most do their homework, it’s a hard sale to make.
Monitoring required
Unfortunately, with a lease, the habit of parking miles away from the shopping center doors and away from all red vans where children will swing wide and mark you for life is more than just a habit, it’s a way of life. Under a lease, you are bound by the rules of the dealer. You wouldn’t give back a friend’s tie with a mustard stain down the front, so why would you return a car with a huge scratch along the door? Knowing that there are fees enforced for damages on a returned vehicle means the duration of the lease could be very stressful for some and not worth the constant monitoring and lack of freedom to do as you please with the car. Leasing also means keeping track of the mileage, and this could also rack up charges upon return if you’ve exceeded your quota for the lease. Remember: You’re not really the owner of the vehicle.
Higher insurance
For some reason, leased cars often come with higher insurance. Perhaps insurance companies feel that leased cars are generally not as looked-after as financed cars and think the owners are less careful. While insurance alone can be a scam, it seems like a double hit to be penalized for leasing a car instead of financing it by paying more. While quotes will often be given by insurance brokers to fill their personal quotas, there definitely seems to be a trend of higher car insurances in leased vehicles.
purchasing
For someone who is financially stable, automotive-savvy, and ready for a long-term commitment, financing a vehicle is definitely the way to go. While purchasing a car means higher monthly payments, it also means that you are paying into a possible profit in the end. Just like buying a home, a car becomes an asset -- something that can be used as leverage in later years. And, unlike a lease, a financed car really is your own and you have the freedom to do as you please -- be it mechanical, aesthetic or the way you drive. While it’s not all puppy dogs and rosy skies, financing is just as beneficial as leasing, depending on the situation.Pros
Make a profitFinancing a vehicle means you are looking to the future the moment you sign for your new car. You are already thinking ahead to the time when you can turn around and sell your vehicle for profit. Unlike selling a leased car for buy-back value and giving your winnings straight to the dealer, selling a financed car at the end of all payments (when you fully own the car) means you pocket the possible tens of thousands of dollars made from the sale. Provided the car is well-maintained throughout the ownership, a financed car should always be considered an asset.
Freedom to modify
The beauty of a financed car is the ability to change the vehicle without the worry of returning the car to a dealer with your invested parts. That means you can pour money into the car knowing that in the end you will potentially make that money back. On a purchased car, you can change anything from the stereo to the engine -- it is, after all, your car. However, it is important to realize that changes such as those will often void any manufacturer’s warranty. If you are willing to spend the money on modifications to increase horsepower, styling and/or performance, chances are you know a thing or two about car reparations, so maintenance of the vehicle should be a breeze and marginally cheaper.
No commitment
Although you’re still purchasing your vehicle from a dealer, you are not in any way bound to them after you drive your car off their lot. The only commitment you have as a financer is to pay your monthlies on time. You can bring your car to any garage for maintenance, drive it however you please or rack up the mileage as high as you want and you won’t have to worry about the dealer’s consequences for breaking the rules. There are very few regulations when purchasing a car. You have agreed to make the car your own; it is essentially already yours, you’re just taking a bit longer to pay in full.
Cons
Higher paymentsWhile financing a car might be smarter in the long run, it often means a higher financial commitment up front. Monthly payments are higher on a lease because you are paying on the total amount of the car instead of a leased time frame. Also, if you wish to bring the monthly payments down to a reasonable level on a more expensive vehicle, this could mean dropping a large chunk of money as a down payment in order to lower the monthlies. While a down payment is useless on a lease, on a finance, you can look at it as an investment you could potentially make back in the future.
Higher sales tax
If you take the time to really look into the total cost of a car, you may be shocked to see the amount of sales tax charged on a financed vehicle. This raised sales tax could mean the difference between leasing and financing for some. Taxes will vary from state to state, however, the difference between financed sales tax and leasing sales tax will always be the same: higher for a purchased vehicle.
Depreciation
While it is true that a financed car is an asset, unfortunately it’s an asset that very rarely appreciates in value. The moment you drive your brand new car off the dealer lot, your car has lost some value. It’s sad, but true. Unless you are willing to invest some serious money in a car with upgrades, modifications and a general overhaul down the road, it’s unlikely you’ll make back more than the car's original price. Profit on a financed car means money in your pocket versus money to the dealer. Also, if you do plan on selling your car in the future, it’s important to do your market research before settling on a car to finance. There are some models that hold on to a great deal of value over the years, while others continue on the slippery slope to “cheap” from the very beginning.
weigh the options
There are a lot of factors to consider when purchasing a car, such as your current financial situation. Lower-income individuals may find leasing the best route, while a student’s best option is undoubtedly the second-hand clunker with zero financial commitment. Use for the car is also important to consider; occasional drivers with low mileage are ideal candidates for leasing, whereas someone who plans to upgrade or tune their vehicle is better off financing.Resources:
http://www.wikipedia.org/
http://www.bmwusa.com/
http://www.leaseguide.com/
http://www.smartcarguide.com/
0 comments:
Publicar un comentario