Buy or Lease a New Car or Truck
What are the Pros and Cons of Leasing vs. Purchasing a Vehicle?
The answer to which is better depends on individual needs as well as driving habits. What are some of the differences between a purchase and a lease? Before a decision is made it’s important to understand a lease. Understanding a lease is the first step in making the correct decision. Trading in an older vehicle can also help to reduce the monthy payments on a new leased vehicle.
What is a New Car Lease?
Leasing a new vehicle is similar to renting with a few differences. The leaser agrees to keep possession of the vehicle for a specific amount of months. The contract also stipulates how many miles can be driven per year. Going over the mileage will result in a charge per mileage for the overage at the time the vehicle is turned in. The over the mileage charge is stipulated in the lease. The more allotted miles per year, the higher the monthly payments.
New Car Lease Residual
The lease residual is the value of the vehicle at the end of the contract. It’s important that the residual amount is specified in the contract for the protection of the leaser. Generally if the residual value is stipulated in the contract and the mileage is kept under the allotted amount, no money should be owed at the time the car is turned in.
If there is any damage to the vehicle other than normal wear at the time the car is turned in, there may be a charged associated with the extra wear and damage. This should also be stipulated in the lease contract.
Advantages of Leasing vs. Buying a New Car
One of the most important factors to keeping a low payment on a lease is to keep the mileage driven to a minimum. The mileage limit should be stipulated in the lease contract. Going over the allotted mileage will result in extra charges when the vehicle is turned in.
- If a person wants a new car every couple of years, leasing a vehicle may be an advantage. The car can be traded in for another vehicle every 2 or 3 years with relatively low payments, if the rules of the contract are followed.
- If the mileage is kept to a minimum on a lease, vehicle repairs could be covered under warranty during the entire lease period. If a new vehicle is turned in every couple of years and a new car is leased, the vehicles could conceivably be covered under warranty for many years.
- Not all vehicles are created equal when it comes to a lease. Vehicles that depreciate in value at a faster rate don’t lease as well as vehicle that have a slower rate of depreciation. This is reflected in the residual value.
In a nut shell, if a person drives the vehicle less than 15,000 miles a year and wants a new vehicle every 2 or 3 years, than a lease may be a better option than a purchase. If buying a car is a better option, get some additional tips on buying a new car or truck. When signing a lease contract be careful that the allotted mileage won’t be exceeded. Always make sure that the residual value is stipulated in the contract.
Buy or Lease a New Car or Truck - Pros and Cons
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