Decide whether buying or leasing is the cheapest option for you.
When it comes to getting a new car there are generally two options: leasing the vehicle or buying it. There are many pros and cons for either option and the decision often comes down to personal preference and finances.
Short Term Cost
Leasing features several advantages over buying. When leasing a car there is little if any down payment, the monthly payments are less and there is generally lower sales tax, because tax is only paid on the amount of the car's value that is used by the lessee. When buying a vehicle there is generally more money required initially, there will be higher monthly loan payments and more taxes paid.
Long Term Costs
In the long term, once a car loan is paid off there are no more payments and the car is yours until you decide to sell it or trade it. Although you will still have repair expenses, there will be no regular monthly payments. If you lease a vehicle you will continue making lease payments, then you'll make any down payments for a new lease when your current one expires. The lack of future monthly loan payments makes buying a car the least expensive financing option in the long term.
Repairs
When comparing the cost of leasing versus buying you must consider the cost of repairing the vehicle. Because lease terms are generally within the warranty period, the expense of repairing the vehicle will be minimal. If you purchase the vehicle, however, once the warranty expires, the cost of repairs will be entirely yours to cover.
Lease penalties
When considering the cost of a lease there are some less visible fees and penalties to consider that are not a concern when you buy a vehicle. When you sign a lease you receive a mileage allowance. Once these miles have been exceeded fees are assessed at a certain rate per each additional mile. In addition, if the dealer considers the amount of wear and tear on the car to be excessive, or if you pull out of the lease early, penalties may be assessed. There are no such penalties when you buy a car.
Cash Payment--No Loan
Although most people do not have the resources to pay for a vehicle without the assistance of a loan, buying your vehicle with cash is another option that affects your decision. Because you'll be paying for the vehicle yourself, and not shelling out interest, it is the least expensive option when compared to making lease payments or buying the vehicle with financing. Buying the car with cash also eliminates the need for monthly payments. If your car is new it will be under warranty, so your repair costs will be minimal.
