Is It Cheaper to Buy or Lease a New Car?
Cars are an indispensable part of our lives as they are essential to our daily living. Deciding between buying and leasing a car can be a difficult decision, entirely dependent on financial standing. Up-front cost and lower monthly payments provided by leases are attractive and they make cars seem cheaper. Cheaper up-front cost does not mean, however, long-term savings.
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Leasing
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Leases are a viable alternative to purchasing a car because they are a cheaper initial investment. Leases are easier to qualify for and they offer lower monthly car payments. There is a substantial cost for enjoying the great deals afforded by leases. Leases are designated for a fixed period of time, generally 36 months; although the monthly payments are not as expensive as a car loan, they become a hefty investment by the end of the lease period. Furthermore, the car doesn't belong to the lessee after the end of the leasing period.
Buying
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Purchasing a car requires more up-front cost to the buyer and most buyers will need a car loan to purchase a car. Car loans are more difficult to qualify for and they are contingent on the buyer's credit history. Depending on credit scores, interest rates may be higher, thereby increasing the down payment and monthly payments. Once car buyers have finished paying off their loan, the car belongs to them.
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Mileage Limits
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Mileage requirements limit the use of a leased car. If you live a long way from your job or commute over a great distance to see relatives in another city, you will probably exceed mileage limits. After mileage limits are exceeded, there is a per mile fee, generally 15 cents per mile. This charge can be very expensive when the car is returned. For example, if a driver goes 4,500 miles over their mileage limit for the duration of the lease, they would owe the leasing company an additional $675 when the car is returned.
Going over mileage limits is very common since unforeseen circumstances can change driving habits during the course of the lease.
Additional Costs
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Leasing companies require that the car is returned in pristine condition. Therefore, any wear or damage to the exterior or interior of the car--no matter how minuscule --will cost you additional fees when it is returned. In order to avoid inflated dealership costs, you will have to pay for minor damage out of your pocket. These charges can greatly add to the cost of the lease.
Best Option
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Leases are much cheaper starting out; however, they can prove very costly by the end of the term. Furthermore, after you've spent three years paying for the car, it will be returned and you will be left without a car. One lease leads will inevitably lead to another since you are car dependent and you will never stop paying a monthly note. Therefore, it is recommended that you purchase a new car instead of lease it. In order to reduce out-of-pocket expenses, maintain a good credit standing, save money and purchase a reasonably priced car.
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