Now that you have just decided to get a new car the next question will be, should you get a lease, loan or pay cash? There are pros and cons for all these and it will be best to be well informed about each of them before making your choice. There are several things to consider before choosing any of these options and these are; money, operating costs, tax, insurance, equity and ownership.
Paying Cash
About 10% of all vehicle purchases are done in cash. Paying cash upfront when buying a car will mean that it entirely becomes yours, and you owe nothing. Doing this may however leave you without any money left for emergencies and investing.
Couple buying car
Initial Costs
Leasing a car has a huge advantage over a loan or cash. There’s normally little cash required when leasing, and in general the better your credit rating is, the less cash required. Normally you may be asked to pay a security deposit, similar to the one you pay when renting a house. Most lease terms are customized, meaning that they can be structured to meet your needs.
I buy or lease a car?
Continuing Costs
Continuing costs are other factors to consider when opting to buy or lease a car. Continuing costs occur after initial costs and before end of lease costs. Continuing costs are paid periodically, but they are also not the only items to consider when purchasing a car. Other factors to consider include; taxes, repairs, maintenance, operating costs and insurance. All these form part of your continuing costs whether you buy or lease your car.
Equity and Ownership
When you lease a car, you are basically renting it. Once your lease expires you’ll have no ownership or equity on the vehicle. You gradually gain equity as you pay off your car. With this being the case you should also consider the amount of money you are likely to pay back over your loan period in order to acquire the title of your car. Even after repaying back the loan and getting the title of your car, the car would have likely depreciated in value.
Taxes and Insurance
In most states when you purchase a car, you’ll have an upfront sales tax payment to make, and this is normally a lump-sum figure. However with leasing you could always amortize the sales and use them over the term of your lease. With leasing you may also have to alter your insurance as most lease contracts state that you do so. Higher limits will be required for your insurance coverage on both property damage and pubic liability. With leasing a lower policy deductible may be required