Compare the Costs: Buy vs. Lease vs. Buying Used

Compare the Costs: Buy vs. Lease vs. Buying Used

Are you in the market for a car and are considering your options with leasing, buying pre-owned or purchasing a brand-new model? Generally, buying a used car will help you save maximum dollars, especially if you drive it for as long as possible. But for those who love a new car and must have the latest technologies, leasing might work well too. If you have the money and can afford the monthly payments on your auto loan, buying a new car will help you gain equity in the long term.

Things to Remember While Leasing

Upfront, leasing is an economical option as you have to pay smaller amounts on a monthly basis. For those who like to drive new technology every few years or want to indulge in luxury and not worry about maintenance and ownership, leasing is a pretty neat deal. Plus, since cars are a depreciating asset, leasing takes away the worry of buyback value.

On the downside, at the end of a lease, you won’t own anything so you cannot enjoy the equity benefits of a buying a car. Lease contracts also have a mileage cap so if you drive a lot, leasing might not work for you as you’ll have to pay a lot more in mileage penalties. Most leases offer 12,000 to 15,000 miles per year and charge 12 cents for every extra mile you drive. Also, you’ll need excellent credit to get a car lease and it will be tough and expensive to get out of a lease if you need to. You also need to make a down payment nearly as much as you’d spend on a new car.

Things to Remember While Buying New

You will enjoy the pride and joy of owning a brand-new car. Plus, after a few years when the loan is paid off, you won’t have to worry about monthly installments. You have the complete freedom to sell the car whenever you want. Auto loan rates are comparatively cheaper for new models and if you are a good negotiator, you can get a really good price from your dealer. You do need to spend on taxes, registration and insurance, which can be a little costly. For those who drive a lot and love taking road trips, buying a new car is the best option. The down payment and monthly instalments can be the highest in the case of a new car so you need to be financially stable to afford a good model.

Things to Remember While Buying Used

Financially, this is considered the smartest and cheapest option in most cases. However, if you buy a car that’s older than five years, you will have to spend a lot on its maintenance as the wear and tear will be quite a lot. Plus, the value you get after using the car will be quite low so if you’re planning on selling it again, it might not fetch you a lot of money. Generally, the interest rates are higher for used cars so if you’re taking out an auto loan, you might have to spend a little extra. However, you can save that money in insurance as used car insurance rates are cheaper than new cars.

Based on your need, budget and aspirations, you can choose the best option for your requirements. Ensure you do all the calculations before making your choice.