To Lease or to Buy? What You Need to Know About Leasing a Car
Does it make more sense to lease or buy your next vehicle? These three factors should help you make up your mind.
Leasing a Car vs. Buying a Car
If you are in the market for a new vehicle, you are probably wondering if you should lease or buy. Both leasing and buying can make sense in certain circumstances, but you need to weigh your options carefully.
Like all aspects of shopping for a car, the lease market can be either a great opportunity or a trap, depending on how you approach it. Here are four essential things you need to know about leasing a vehicle.
1. Even if you’re leasing, you could still be on the hook for excessive mileage or wear.
If you plan to lease your next vehicle, you will want to read the fine print carefully. Most leases set a cap on the number of kilometres you can drive, and that cap can be pretty low.
A typical lease agreement allows you to drive 20,000 kilometres a year, and you might be surprised how quickly those kilometres add up. If you rack up too many kilometres, you could be on the hook for thousands of dollars when the lease expires. The dealer will also go over your car with a fine-toothed comb, and every ding and dent could cost you even more.
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2. The up-front cost of a lease is often lower than if you were buying.
Many drivers prefer to lease because the up-front costs tend to be much lower. There are no-money down leases and low-cost options to get drivers in the cars they want with little money up-front. If you need a new car but don’t have the money for a hefty down payment, a lease can be a good option.
You will still need to budget for the cost of monthly lease payments, so run the numbers and make sure you can afford the vehicle you have in mind. You will also want to compare the cost of buying versus leasing to make sure you get the best deal possible.
3. Car leases are a great option for frequent upgraders.
If you insist on driving a new or late-model car, a lease may be the best choice for you. The flexibility and lower up-front costs of a lease are tailor-made for drivers who upgrade their rides on a regular basis.
If you plan to keep your next vehicle for many years, a lease is probably not the best choice for you. If you plan to upgrade to a newer model in a couple years, a lease is definitely worth considering.
4. Leasing may be a smart choice for business owners.
If you own your own business, leasing a car may be more advantageous than buying. The vagaries of the tax law mean that many small business owners can save money by leasing the vehicle they use for their companies.
You will need to keep scrupulous records and vehicle logs and account for the kilometres you drive for your business versus personal trips. If you are ever audited, they will want to see these logs-and you will need to be able to produce them.
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