To Lease or to Buy – Considering an Age Old Consumer Dilemma

by Guest Author on September 6, 2013

When it comes to acquiring a new vehicle, modern consumers are spoilt for choice in terms of purchasing and financing options. This wealth of choice has served a critical purpose in the wake of the recession, as it has enabled individuals to source flexible financing solutions that suit their unique circumstances.

The most common dilemma facing automotive customers is the choice between leasing and buying, which represent the two most popular forms of car financing. A lack of understanding or financial literacy can often force consumers to make the wrong decision, and this can have devastating consequences in the current economic climate.

To Lease or to Buy: The Key Considerations

With this in mind, it is imperative that you fully appraise both options carefully prior to making a fixed financial commitment.

Consider the following: -

The Fundamental Difference between Leasing and Buying: As a starting point, understanding the fundamental differences between leasing and buying is crucial. In essence, leasing finances the use of a vehicle for a predetermined period of time, whereas buying with a loan allows you to purchase the vehicle outright. Another key differentiating factor is that you are only responsible for a portion of your vehicles cost under the terms of a leasing agreement, while those who buy must meet the full financial liability of ownership including maintenance and repair.

Your Personal Priorities as a Driver: Before you consider the financial costs involved, it is important to evaluate your own priorities as a motorist. If you are looking to secure a reliable and affordable vehicle for long term use, for example, buying represents the most cost effective option. Should you wish to avoid expensive repair costs and the gradual loss of resale value as a driver, however, leasing represents a logical step that enables you to access a brand new car every two to three years.

The Financial Implications: In basic terms, leasing offers drivers access to lower monthly repayments than purchasing. While this may appeal to some, it is important to remember that individuals who purchase a car are able to retain ownership of the vehicle once the loan has been repaid. In this instance, the difference between leasing and buying is similar to that which exists in the property market. Conversely, buyers will find that the value of their car has depreciated once the loan has been settled, meaning that they may not have achieved the optimum value for their investment. Lease owners avoid these issues, while also having the option to upgrade their vehicle at the end of a lease term.

The Last Word

You will also need to consider your own personal financial circumstances prior to making a final decision, as those who are encumbered with debt may be forced to consider a bad credit loan. This can impact heavily on the type of financing options that are available, so you should research these as an initial starting point. Only then can you begin to evaluate the true value of leasing or buying, and more specifically how each option will benefit you.

About Lewis R Humphries: This article was written by Lewis, who is a financial expert and blogger based in the UK. For anyone looking to purchase a new car or considering entering into a bad credit loan he recommends that they consider all of their financing options prior to making a decision.

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