When looking for a car to suit your needs, one aspect to consider is whether or not you will be buying or leasing the vehicle. This can be a hard decision to make, especially if you are a first-time car buyer. Below are some hints as to how to decide between leasing or buying a used car.
Leasing a car often has a lower monthly cost than repaying vehicle finance. With a lease, you are paying for the depreciation of the car during those years rather than the whole vehicle cost. If you need access to more money each month, leasing may be a better option.
Buying a car through finance may have high interest rates, which means that if you are earning a lower income you will have to scrimp and save to get by. However, many used car dealerships offer favourable rates compared to banks or financial institutions. Use a loan calculator to calculate your affordability when considering your monthly income and budget.
Leasing a car often means that you will have to have a good credit score, which can be detrimental to those who have little to no credit history. Your credit score will count if you decide to buy, but leasing a vehicle requires a score of 720 points or higher, which can be difficult to achieve as a young buyer.
If your credit score falls below 680 but is above 620 points, you may face rejection or highly increased interest rates. If you are approved for a lease with a low credit score, you will need to be prepared to pay higher rates, which can eat into your monthly budget. Work on improving your credit score before leasing or buying to get a better deal.
One of the main aspects to consider when looking for a car is to look at how much and how often you drive your car. Buying a car means that you have no restrictions on your mileage, but leasing a car may place restrictions on this. Some plans even charge extra for these extra kilometres.
Some leasing companies allow you to buy the kilometres upfront which means that you will pay less for these extra charges. However, if your budget does not allow for this sort of cost it is best to look into buying a car. If you plan on trading in the car you buy, you will also be penalised for above average mileage but this will not be a monthly cost as is the case for some leases.
If you are prone to accumulating scratches on your car or have a high risk of damage to it due to children or other hazards, leasing is most likely not the ideal choice for you. This is because a lease will charge you wear and tear fees on the vehicle for the damaged incurred.
Wear and tear fees vary depending on your lease provider, but are typically limited to the total of three months’ lease payments. This means that you will have to keep the car in pristine condition, which can be difficult. Buying a car allows you to own the car free and clear, without having to worry about paying extra monthly fees.
Buying a used car may mean it will depreciate less than a new car but it will still depreciate, which will lower its future resale value. However, a leased car’s future value has no bearing on you financially and its depreciation will not affect your finances.
One downside to leasing is that you will not have any equity in the vehicle, so you will be unable to sell it to regain your funds. Selling a car can be tricky, so be sure that you calculate and carefully check the resale value of your used car before putting it on the market. It is important to note that damage and mileage play a large role in how much you can ask for your car.
This is an important question to ask, as it will help to determine whether you should lease or buy your car. It has been shown that drivers of newer model cars keep their vehicles for up to six and a half years, and those who drive older models keep theirs for five years.
If you prefer not to keep a vehicle for a prolonged amount of time in order to always drive the latest model, leasing a car is a better option for you. If you are looking for a reliable vehicle to last for years, and if your monthly finances do not factor in the cost of increasing lease fees, buying a car to own for five years and onwards is the right option to choose.
