By Jessica Malitoris on December 7, 2009
The process of obtaining a car can be a long, difficult, and complex one. When deciding whether to lease or buy a car, the most important thing to keep in mind is what you can afford. Leasing and buying both have their own benefits and costs, so keep them in mind when making your decision.
Leasing is an option which allows you to have a new car every 2-3 years, without having to worry about major repair risks. Leases typically last for 24 to 48 months, and monetary costs include the depreciation charge, a finance charge, and the sales tax. If you want a car that is always under warranty, leasing is the best option. Monthly payments are usually a fraction of car loan payments. On the down side, leases are usually restricted to a certain number of miles, and if you exceed that limit, you can rack up additional charges. Termination fees also apply if you end your contract early. Buying is a better choice if you would prefer to make modifications to the vehicle. When buying, keeping in mind that used cars tend to have better value in the long run, and the certified vehicles are usually as reliable as newer ones. On the other hand, new cars typically have the most recent safety features, audio options, or GPS maps.1
Whichever option you choose, keep in mind there will always be additional costs: insurance, gas, repairs, registration, and taxes. Actually finding the money for these payments can be another chore. Car loans can be particularly hard to come by in today’s economic climate. For those with good credit scores, car companies themselves are usually still willing to provide loans, and most major car companies have a specialized department for that purpose. For those with not as good credit scores, getting loans from auto companies can be very difficult, if not impossible. Fortunately, credit unions are often willing to provide financial support, even for those with very poor scores. Therefore, it is very important to know your credit score before trying to get a loan. Equifax, Experian, and TransUnion provide free credit reports online.2
For those with lower credit scores, leasing or buying a used car are probably your best options. Whichever decision you make, be sure it is the best for you, and suits your financial situation.
1 Chappell, Kevin. "Auto Financing: leasing versus buying." Ebony. 01 Mar 2008. 56.
2 Gray, Tim and Matthew J. Lee. "Even in slump, loan deals to be had Buyers with good credit can still find auto financing." Boston Globe. 16 Feb 2009. J1. |