Important Considerations for Getting a Car
August 30th, 2018
Is It Better to Buy or Lease a Car?
There are many important considerations associated with buying or leasing a vehicle. From monthly payments to mileage limits, the decision of whether or not to lease a car can only truly be answered by the individual making the financial commitment. When evaluating the factors associated with buying or leasing a vehicle, it is important to consider how unexpected incidents on the roadway will impact your vehicle.
Leasing a Car
Most lease agreements last 2 to 3 years. This method of obtaining a vehicle allows individuals to get a car and still maintain their budget; however, if you are not careful, you could end up paying unexpected costs throughout your lease. For individuals who do not plan on keeping the same vehicle for an extended period of time, there are some advantages to leasing a car:
- Smaller monthly payments
- No long-term commitment
- Trade-in value doesn’t matter
At the most basic level, it can be easy to understand why leasing a car seems like a cost-effective option.
Downside to Leasing a Car
Because the individual leasing a vehicle is not the owner, there are several important factors one must consider to avoid unexpected costs when leasing a car:
- Damage to the vehicle
- Mileage caps
- Penalty for breaking your lease
Damaging a Leased Car
Unless otherwise noted, individuals who lease cars are usually prohibited from adding permanent changes to the vehicle. Any damages to a leased vehicle must be fixed upon return or you will have to pay a fee. Scratches and dents that one could otherwise live with, may end up costing you in the long run. When a leased vehicle sustains damage, it is usually easiest to have it repaired.
Some lease options have a damage protection plan that individuals can opt-in for. Check with your dealership before leasing a vehicle to see what damages, if any, are covered under a plan like this.
One important consideration when deciding whether or not to lease a car is: how often to do you drive? The typical lease contract allows for about 12,000 miles a year and usually has a fee for every additional mile. From 5 to 20 cents a mile, high-mileage drivers should consider this factor before leasing a vehicle. While purchasing extra miles up front may be an option, the cost paying for going over your mileage limit may level the cost of purchasing a car.
Breaking your Lease
Leasing a vehicle is a great option for those who don’t want to have the same car for more than a few years; however, it is important to understand the penalty associated with breaking your lease. You could end up paying as much as 6 extra monthly payments if you violate the terms of your lease, so be sure you can handle the commitment before leasing a car.
Purchasing a Car
The decision to purchase a car is not one anyone should make lightly. The financial commitment alone can be a lot for some people to take on, but there are many factors to be considered by individuals contemplating this decision. When purchasing a car, you typically have two options:
- Pay cash
- Take out a loan
We explored some of the differences between leasing and purchasing a car above, there are some challenges associated with purchasing a car that are equally important to consider.
Downside to Purchasing a Car
Typically, when purchasing a car, down payments and monthly payments are more expensive than if you were to lease; making the initial out of pocket expenses higher. Another factor that may negatively affect one’s decision to purchase a car is depreciation. Otherwise known as diminished value, depreciation refers to the loss in market value that a vehicle incurs as it is used. Depreciation can make it difficult to resell a vehicle after a prolonged period of time, so keep this in mind before purchasing a car you may wish to sell later in life.
Upsides to Purchasing a Car
Perhaps the biggest advantage to purchasing a car over leasing, is that the car belongs to you. Buying a car allows you to build equity if you make monthly payments and pay off your loan. Another advantage to buying a car is that you do no have to make payments on it forever. Once you have paid off your car, it is yours to use and resell however you please. Buying a car allows the owner to use it as often or infrequently as possible. Damages to the car can be handled when convenient for the owner and any permanent changes can be made without fear of penalty. Lastly, car insurance premiums are usually less expensive for individuals purchasing a car.
Car Accidents and Unexpected Roadway Incidents
The factors above are worth giving considerable time before making the decision to lease or purchase a car; however, also consider how doing so will affect you if you are involved in a car accident. If you are hit due to the negligence of another party, filing a claim may be easier to handle; however, if you are negligent in damaging your car, the expenses you face could make up for the money you tried to save by leasing in the first place. It is important to keep these considerations in mind before investing in a vehicle of your own.
Priyanka Kasnavia is an online marketing specialist who has been working at Simmons and Fletcher, P.C., for over a year. She graduated from Texas Christian University in 2017 with a degree in Strategic Communication and has been accepted to the University of Houston Law Center starting fall of 2018. Priyanka's expertise centers on search engine optimization and content creation.