There is an ongoing conversation around leasing a car versus financing one. Various financial institutions that offer car finance also offer a leasing option. Leasing appeals to a large majority of people who don’t have the money to purchase a car without making monthly payments, and recently it has become more popular.
There are some pros and cons of leasing but 2 main reasons have aided this growth in popularity. Firstly, the installments are cheaper than financing a car and insuring it. Secondly, leasing requires that you are permanently paying a monthly installment in order to drive a car, however many people now accept this as a norm anyway.
This is because modern cars are almost always outdated by the time they are paid off, which means owners want to upgrade. They often trade them in after their payment terms are concluded, only to continue the monthly repayments on a new vehicle. So the argument for leasing is actually quite solid – why pay more than you need to? And why go out of your way to own a depreciating asset that you may sell as soon as it belongs to you?
As mentioned, the disadvantage of leasing a car is that you are permanently making monthly payments. If you want to stop paying at some point then buying is the only way to go.
Why leasing may be a good move:
- Cheaper installments – you will save cash that you could invest elsewhere.
- Insurance can be included in the lease agreement.
- No services to pay for.
- No upkeep costs (you won’t pay for any normal wear and tear).
- No resale risk.
- No balloon payment.
- You will have the option to drive a new car every time your lease ends (probably a nicer car than you could afford to buy).
Why you may want to finance:
- You want to own the car you drive.
- It’s also not advised if you are accident prone as you will pay for minor damages to the vehicle that aren’t considered part of normal wear and tear.
Other points to note:
If you are going to lease, get your mileage right. You should know how many kilometres you put on your car every month. The more accurate you are the better, as the amount agreed upon decides the rate you pay. When you exceed the mileage you’ll be charged per kilometre, which can become a costly misjudgement.
If you lease be sure to take note of the condition of the vehicle. Make sure the company is aware of any scratches and take pictures so that you have evidence. You don’t want to pay for minor damages that weren’t your fault.