Articles

Which is Better – Purchasing a New Car or Leasing a Car?

by Sanjana Mehta Insurance Advisor

The first question that most people ask themselves after making up their minds to get their own car is whether they should buy a new one, go for a second hand vehicle, or simply lease it. Your budget, your goals, and your personal preferences will determine the best option for you because there are advantages and disadvantages to purchasing a new car as well as leasing one. Here, we will cover all the major pros of both moves so it’s easier for you to make an informed decision.  

 

Advantages of Leasing a Car

Here are five main reasons as to why leasing a car could work out for you: 

 

  • Lower payments: Purchasing a new car through auto finance will translate to high EMI payments depending on the tenure of the loan. Leasing a car over the same repayment tenure will mean lower monthly payments as it is cheaper to lease a car in comparison with purchasing a new one. The down payment on a lease is also very low and sometimes nil, with no sales tax either. However, you might have to pay some extra charges when returning the leased car in case the distance travelled exceeds a certain limit. Charges could also be incurred for early termination of the lease and damages to the vehicle.  

 

  • Lower expenses: If your leased car is covered under a warranty from the manufacturer, your repair expenses will be relatively low during the tenure of the lease. However, you will still bear the responsibility for regular maintenance and upkeep in addition to car insurance.  

 

  • No need for loan approval: The purchase of a new car requires you to have an excellent credit history or you may have to pay a high interest rate in order to buy one. Leasing a car, on the other hand, does not require a stellar credit score as leasing companies usually aren’t too strict when compared with banks as they have the option to re-possess the car if you violate any of the lease terms or fail to make payments on time.  

 

  • Flexibility: If you purchase a new car, you will likely be stuck with it for years until you can afford the next best thing. Leasing a car, on the other hand, offers more flexibility in the sense that you know when the lease will end, and when it does, you have the option to either renew it or go for an upgrade based on your financial standing. This is one of the main reasons why young professionals, especially those in metropolitan cities, prefer leasing a car rather than purchasing one as it gives them the opportunity to get behind some of the slickest wheels over the years.  

 

  • No sale-related hassles: When you lease a car, you need not worry about its depreciation or reduction in value as a car owner might when he/she decides on selling it. Once the lease expires, you will simply have to return the vehicle and then decide whether you want to carry on with a similar vehicle or go in for an upgrade or even purchase a new car at the end of the term.  

 

Advantages of Purchasing a Car 

Here are some reasons as to why purchasing a car could benefit you:  

 

  • Lower payments in the long run: Although the monthly lease payments may be less expensive in comparison with monthly car loan EMIs, purchasing a car will mean that with each EMI, you have the opportunity to build up equity over the long term for when you decide to sell the vehicle. Purchasing a car can be the least expensive method to own a vehicle as the more you drive it, the fewer the costs.  

 

  • Option to sell: When you lease a car, you will have to stick with it until the end of the lease term. Terminating the lease contract earlier could see you incur charges. Owning your own car, on the other hand, means that you have the option to sell it whenever you feel like. If you come upon some money in the future, you will have the option to trade it in and get an upgrade.  

 

  • No limit on mileage: Taking a car on lease means that you will have to watch how many kilometres you drive as exceeding a certain limit would mean extra costs. Owning your own car, on the other hand, will not inflict any such restrictions as you are the owner and have the freedom to go however far you please. However, the maintenance costs of your vehicle will have to be borne by you and excessive driving could also increase your repair costs.  


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About Sanjana Mehta Advanced   Insurance Advisor

48 connections, 0 recommendations, 132 honor points.
Joined APSense since, November 7th, 2016, From Bangalore, India.

Created on Sep 24th 2019 01:41. Viewed 357 times.

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