Should You Lease or Buy Your Car?

The question of whether to buy or lease a car depends on several factors and can only be decided after much thought. Leasing may be a viable option to you, depending on your business, lifestyle and desires, but you should not just blindly lease a car without acquainting yourself with all the factors involved. If you do, you run the risk of being cheated or being given a raw deal by a fraudulent salesperson.

Leasing has become more popular in recent years due to new car prices, which have spiraled almost out of the reach for the ordinary wage earner. And due to the change in federal tax laws that prevent you from getting finance interest deductions on car loans. So leasing offers a better vehicle than you could afford for less cost and much lower monthly payments.

Leases come in two types; open-end lease and closed-end leases. A closed-end lease means that you can return the vehicle at the end of the lease and walk away with no more to pay – unless there is an excess mileage or damage cost. An open-end lease means that you must pay the difference between the residual value and the actual market value at the end of the lease and could amount to a significant sum.

A buyer should only agree to a closed-end lease, even though in some areas (like Canada) the other type seems to be popular. Most lease contracts are written to discourage the customer from ending the lease early, so if you think there’s a chance you might want to, leasing may not be your best option. If you usually drive more than 15,000 miles per year or often mistreat your car, you could be hit with an excess mileage or wear-and-tear charge. Excess mileage can sometimes be ‘bought’ before you sign the lease.

If you would like to customize your car, don’t lease, because a leased car doesn’t belong to you and you’ll be charged for the cost of undoing what you’ve done. One of the benefits of leasing is that you can drive a new car all the time, and the monthly payments will be lower than if you were paying for it with a normal loan. But remember that you will always be paying. If you buy a car and drive it for many years, you will have a time period that is free of car payments. Also, if your credit rating is not perfect, you might have to pay higher interest rates when leasing.

There are many other things that need to be taken into account when deciding whether the lease or buy outright. You are the only one who can make the decision, but whatever you decide, you need to first equip yourself with all the information you can find about leasing.

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