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Buy or Lease a Car? Consider These Factors Before Deciding

Posted By Anthony Fontana On July 17, 2012 @ 6:04 pm In Credit & Debt,Insurance,Saving,Saving Money,Smart Shopper | 1 Comment

Buy or Lease a Car? - Quicken Loans Zing BlogI hate practically everything about driving. Traffic. Paying for gas. Red lights.

However, driving is an absolute necessity in my everyday life. With that being said, if I have to drive, I prefer to drive something new for these reasons:

  • Let’s face it, a new car is cooler.
  • I enjoy the new car smell.
  • You don’t usually have to worry about major car repairs.

The only way to get these things is to lease a car every couple of years. When it comes to money, is it better to lease a car for a couple years or purchase a new vehicle?

As I was stuck on the side of the road the other day, after my car suddenly stopped working, I began to wonder which choice is best for me.

Throughout my eight years of driving, I’ve had three different vehicles. Two were leases, and the other was a truck my dad paid off and gave to me.

I first drove a brand new Buick Century (I know, I know, it’s not the typical car a 16-year-old would want to drive, but still, it was brand new). I drove it about a year before my parents realized I was way over the mileage for the lease. The car sat in the garage for the last five or six months we had it to keep the mileage from going any further over the limit.

From there, I moved onto a used truck. I drove the truck for about six years. While I have many fond memories of driving the “Green Monster” (minus paying about $80 to fill it up), our time together had to come to an end. Despite all the good memories I have of the truck, it had its faults:

  • Flat tires
  • Engine problems
  • Cracked windshield
  • Bad brakes

After finally getting rid of the truck, the decision was made to take on a lease. Throw out the other day that I was stuck on the side of the road (turns out when I got my oil changed the day before, something was disconnected and not reconnected), and I’ve been happy with my decision to lease a car. Would you be happy with the same decision? Below I’ll break down the differences between buying and leasing a car. From there, you can decide the option that best suits you.

1. Mileage

If you do a lot of driving, buying a car is probably your best bet. The typical lease allows a driver an average of 12,000 miles per year. When you break it down, if you get 1,000 miles per month, you get only 250 miles per week, which equals out to about 36 miles per day. If you drive 10 miles to work every day, throw in the 10 miles it takes to drive back home and you have only 16 additional miles for the day. If you go over the allotted mileage, dealerships can charge anywhere from 10–20 cents per mile.

2. Cost

If you’re on a tight budget, leasing may be your best bet. The short-term monthly cost of leasing is significantly less than the cost of buying. Monthly lease payments are anywhere from 30–60% lower than loan payments you would pay if you decided to purchase the vehicle.

However, the long-term cost of leasing is always more than the cost of buying. After purchasing a car, it’s yours for as long as you want once you’ve paid it off. Leases, on the other hand, usually run out after two or three years. After that time is up, you’re back to deciding if you want to lease again or buy. It’s much cheaper to buy one car and drive it for 10 years than it is to lease four or five cars in that same time period.

3. Repairs

The longer you drive the same car, the better the chance the car will need repairs after a certain period of time. When you make the decision to buy a car, the cost of those repairs is your responsibility. If something goes wrong with your car during a lease, many times the dealership is responsible for repairing faulty parts.

4. Car insurance

When leasing, the vehicle still belongs to the lease company. For obvious reasons, the company wants to ensure its investment is covered under any circumstance (minor/major accidents, or if it’s stolen). You’ll be required to get comprehensive insurance and along with liability coverage, as well.

When buying, you have more options, unless you’re getting a loan and financing the car. If you pay for the car up front, you can get any type of insurance you desire. However, if you get a loan and finance the car, you’ll be required to get comprehensive insurance.

5. Technology

Are you OK with not having the latest up-to-date car? I’m not only talking about having the best stereo or GPS system, either. From a safety standpoint, newer cars will have more improved safety features. If you purchase a car, eventually its features will go out of date. However, if you lease a car, you’ll always have the most up-to-date technology available.

While I’m currently on my second lease, the only problem I can say I’ve had with a lease is going over the mileage. To prevent that, you can closely monitor how much you drive or pay a little more to add more miles to your lease agreement.

In the end, I enjoy having a new car every couple years, and not having to worry about paying for engine problems in the long run.

Do you prefer leasing or buying your own car? Let us know in the comments section below!

 


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