Chances are, your car is going to be one of your biggest financial assets, other than maybe your home. You wouldn’t dive into buying a home without considering all of your mortgage, loan, and tax options, would you? Your approach to getting a new car could be the same. For many people, buying their new car outright just isn’t the most financially sound decision they could make – long term car leases could actually be far more sensible. If you’re umming and ahhing between the two options, ask yourself the following questions.
How is your monthly cash flow?
Generally, leasing a car will require lower monthly expenditure than buying a car on finance. This is because, when you lease a car you’re expected to pay for the car as it depreciates over the years, whereas buying a car on the same terms but on finance means you’re always paying the brand new price. If your cash flow can’t comfortable stretch to a new car, leasing could be the right option for you.
What do your savings look like?
The initial cost of a car, including sales tax and the down payment when buying a car on finance can require you to draw a significant sum from your financial reserves. On the other hand, leasing a car can have a minimal down payment, and some dealers ask for no down payment at all. If you don’t have access to a large sum of money, leasing a vehicle could be far more favorable for you.
Do you drive for business or personal reasons?
When you lease a car for business purposes, a percentage of this cost can be deducted from your taxes. This is not the case on the interest on car finances. So if the majority of your driving is for business purposes, a lease could see you financially better off.
What sort of car do you want to drive?
Depending on how your finances stretch, you might find that you’re better able to afford the car of your dreams on lease, rather than purchasing it outright. Why not visit All Car Leasing to see which cars are available within your budget? It could be more than you realize.
How long do you want the car for?
Long term, it’s more economical to own a car than lease it. That being said, if you only want the car for a few years, leasing makes a whole lot more sense. While you lose the flexibility with a leased car, as there could be fees if you choose to terminate the lease early, it’s perfect for a fixed term. For example, if you’re moving to a new state for work, but you’re only expecting that job to last three years, a fixed term lease could make perfect sense for you.
How is your driving?
If you drive a lot and drive your car hard, you might find that the costs incurred on leasing your car make it less economical than owning it. You may have to pay if you drive over a certain number of miles a year, and you’ll certainly have to pay if you get any scratches or other damage. If you drive your car hard or far, you might find owning it outright makes more sense to you.
There are many different reasons people choose to lease or buy their car, which isn’t just financial. Ultimately the decision lies with you, but it doesn’t hurt to explore your options.