Buying vs Leasing a Car. Which one is the smartest move fina..

Buying vs Leasing a Car. Which one is the smartest move financially?

Number 1: Buying a Car

When it comes to buying a car you can pretty much buy whatever car you want. It could be 2 years old, brand new it doesn’t make a difference. Unless you pay cash outright you’re going to end up financing it.

When you finance you take the COST of the car minus the down payment and then you finance the rest over a specify period of time. At a specify interest rate. Most people finance a car between 48-72 months. Anywhere from a 2.5% interest rate maybe all the way up to 5% depending on the type of car and your Credit History. And then you’re going to end up paying whatever sales tax on the purchase price of the car.

Now you factor all of that in and then once you pay off your loan in however many years now you own the car and it’s 100% yours.

Drawbacks to buying:
⁃ you’ll be responsible for all wear, tear and maintenance on the car
⁃ You pay FULL sales tax up (Unless you live in Alaska, Delaware, Montana, New Hampshire, and Oregon that do not have statewide sales tax)
⁃ Payments are higher


Number 2: Leasing a Car

Leasing generally works best when you want to have a newer car every few years and have the LOWEST payments possible. If you just want to own a car until it stops running, then leasing it’s not for you. When it comes to leasing the way it works is that it’s for a fixed term usually between 24-36 months. During this time you have a certain amount of allotted miles. Generally is going to be between 10,12 or 15k miles a year. If you have a 3 years 36k miles lease you will need to return the car with 36k miles or less to avoid paying any excess mileage fees. These fees usually range from 20-25 cents/mi for every single mile you go over whatever you’re allotted.

When you buy a car you won’t have to pay any excess mileage. Instead of paying mileage fees, generally you will see some depreciation with the more miles you end up putting on that car.

The first reason why leasing a car is often less expensive. Is that unlike buying a car you’re not going to pay the sales tax on the full purchase price of the car when you get the car. Instead you only pay sales tax on what your monthly payment is. Depending on what state you live in this could be great for you. The lease price is also determined by the amount of depreciation the car is going to see during the time that you drive the car.

You’ll be paying a monthly price for the DEPRECIATION rather than paying the FULL cost of the car. With leases this is often why is a lot less to lease the car than own the car because you’re ONLY financing the DEPRECIATION of the car during YOUR ownership and the the entire cost of the car as when you buy it.

You might also get better tax write offs too for leasing a car specially if it’s for business purposes. Where is extremely simple just to write off the lease upfront.

Last but not lease when the lease is done you DO NOT have the hassle of selling it. You just return the car give them the keys and you’re done.

Both buying a car and leasing a car have their own advantages and disadvantages and what really makes the most sense is entirely on your situation. Just don’t go and buy new a car drive it for 2 years and then sell it and have a huge loss then to go a buy a new car again. In that situation you’re better off leasing, it really all depends on YOUR situation.

Just to sum it up if you want to drive a new car every few years, want to have a lower monthly payment to have more cash flow and don’t want the hassle of having to sell the car when you’re done with it, and not have to pay the sale tax on the full price of the car, only on what your monthly payment is. Then leasing could be a better option for you. With this you are financing JUST the DEPRECIATION and not the full cost of the car. And when you’re done you just swap it out for a newer car and that car can be whatever you want it to be. You can get a decent tax write off on leases as well. Because you can write off the full cost of the lease against your income so the lease becomes significantly less at that point.