A car is a big, important and exciting purchase. When shopping for a car, you should always do your research to weigh your pros and cons. It’s especially important to look at the advantages and disadvantages when determining how you’ll finance your car. Should you lease or buy? The decision of leasing vs. buying might seem a bit overwhelming, but there are only a few key things to consider.
Leasing vs. buying really comes down to your individual needs, lifestyle and some of your wants too. If you use your car primarily for work and your job requires racking up kilometres, leasing might be your best option. Choosing between leasing a car vs. buying a car isn’t always a money issue, but if you’re concerned about money or have bad credit, making a list of pros and cons can help guide your decision.
Pros of Leasing a Car
Your monthly payments will potentially be lower.
If you don’t have the money upfront to buy a new car without auto financing, leasing can be a good option because of lower monthly payments. When purchasing a car, financing is determined by the value of the car minus the down payment — if you make one. Overall, you’ll only be charged the depreciation value of the car for the number of years you lease it.
You’ll always be driving a new car.
Do you change your mind often or always want something new? Leasing is definitely the option in this case. Instead of buying, leasing ensures you always have the latest model with the most recent technology. Aside from the shiny new car and with the newest features, leasing may also save you money on maintenance down the road.
Cons of Leasing a Car
Your insurance might be higher.
Yes, you may save on maintenance costs by continually leasing a new vehicle, but your insurance will likely be higher. If you lease a new vehicle every few years, especially if it’s a high-end car, you’ll have to factor in a higher insurance premium.
You need good credit to lease a car.
Unless you have a good credit score, leasing might not be an option. The costs of financing during a lease are always higher than getting a car loan because you don’t pay off any principal interest. In addition, most dealerships require you to be financially stable along with having a good credit rating.
Pros of Buying a Car
Buying a car can help with budgeting.
When you purchase a car with financing, you can easily calculate how much your monthly payment will be and how long until it’ll be completely paid off. This is helpful if you’re on a tight budget or planning for the future.
A car you purchase is equity.
A car you fully or partially own is an asset and counts as equity. You can use your vehicle as a trade-in for a down payment for a new car in the future.
Cons of Buying a Car
You may have expenses from mechanical problems.
Any mechanical issues that arise after your warranty is over, come directly out of your pocket. You may incur more maintenance expenses as your car gets older and has more mileage. If you chose to sell your car, you’re fully responsible for this, including any paperwork related to the sale.
Your car will depreciate.
You may have heard this before – the moment you drive the car off the lot, it depreciates in value. Wear and tear, general use and accidents all decrease your vehicle’s value. If you sell your car, you probably won’t get close to the same amount you paid for it.
At the end of the day, whether you lease or purchase a car depends on what your needs and financial situation are. Weigh the pros and cons based on what you need a car for and how you can fit it into your budget.
If you’re like 25% of Canadians and your credit score is less than perfect, buying a car might be the option given your credit history and rating. Contact us or drop in to Birchwood Credit Solutions and we can help you get into the driver’s seat with financing for your future car.
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