What Are the Advantages of Leasing or Buying a Car?
Is It Better to Lease or Buy a Car in 2022?
The debate of obtaining a new car, truck or SUV through leasing or buying isn’t going away anytime soon. Both methods of financing have pros and cons that will hit differently from shopper to shopper. However, that isn’t going to stop Southside Dodge from giving people the best information we have to help them through this difficult decision. So, is it better to lease or buy a car in 2022? Let’s take a look at a few things you might need to know.
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Basics of Buying a New Car
Traditionally, when someone wants to buy a new car, they work with a lender to obtain a loan to buy the car. Then they make monthly payments (plus interest) until the loan is repaid. Once that loan is paid off, the buyer will own that car for as long as they wish. Monthly costs are reduced to fuel, maintenance and insurance.
Why is Leasing Popular?
Leasing, on the other hand, kind of reverses what a person actually pays for. Instead of paying for the retail value of a new vehicle, monthly lease payments actually offset the natural asset depreciation that occurs with new vehicle sales. People often choose to lease because the amount of money they are responsible for each month could be significantly less than would be required with traditional financing. Plus, leasing allows people to get new vehicles on a much shorter timeline.
Head-to-Head Comparison: Leasing vs. Buying
Making the decision to buy or lease means taking a hard look at your financial situation and goals. Check out some of the advantages of both financing methods in the table below.
|Leasing a Car||Buying a Car|
|Mileage||Leases limit the number of miles that can be driven because the ‘owner’ is paying for a pre-determined value depreciation.||Owners are free to drive as much as they like. There are no limits.|
|Resale Value||Resale is a non-issue because when the lease is up you can just turn the vehicle in and start a new lease, or walk away.||When it’s time to move on, owners will need to decide between trading the old car in or selling it privately. Resale (trade-in value) is very important.|
|Getting a New Vehicle Early||Getting out of a lease early can be difficult and likely will involve having to pay a number of termination fees or other penalties.||Even if there is still an outstanding balance on a vehicle loan, it is possible to sell the car and choose a new model when you would like.|
|Monthly Payments||Monthly lease payments are going to be less than regular financing, but there is no end to them.||Payments may be higher than leasing, but they will end when the loan is completely paid off.|
Leasing vs. Buying with a Low Credit Score
Good people run into hard financial times for all kinds of reasons. The result is often a credit profile that is less-than-ideal. However, that doesn’t mean these people don’t need safe and reliable transportation. Buying a new car with a low credit score is possible, but it comes with some additional considerations.
First, and most importantly, people with low credit scores are likely to be charged higher interest rates. Some of this can be offset by choosing a pre-owned model. In fact, obtaining a loan for a used vehicle could be what the doctor ordered to rebuild a credit score.
When it comes to leasing with bad credit (a credit score below 620), the news isn’t great. It is theoretically possible to do, but it likely won’t be an easy process to complete.
Make an appointment with Southside Dodge, today, if you would like to discuss your option to take home a new vehicle.