Since car leasing was introduced to the consumer masses, it has become a popular choice for those wanting a new car. During the financial meltdown at the end of the last decade, the banks were making the choices for you. The new car market was flooded and residual values were plummeting, and the only affordable option for obtaining a new vehicle was to purchase one outright. Not only was leasing impossible, but obtaining a vehicle loan was no easy task either. Car sales might have been at an all-time low, but for the first time in years the number of people purchasing versus leasing a new car was tilted in favor of vehicle ownership.
Fast forward a few years later and we have watched residual values rising again, and the banks purse strings have loosened up quite a bit. This has brought to the forefront the age old question, should you lease or buy your car? Well, before you can answer that question, there are a few things you should consider.
First and foremost, what do you value most? Do you want a cheaper payment and a nicer car, or are you more concerned with the best purely financial decision? If you want a brand new $30,000 car with all of the trimmings but you don’t like the idea of having the monthly purchase payment that comes along with it, then you should consider leasing. The monthly lease price is often times half the amount of what it would cost you each month if you were to buy the car. The catch is that when the lease period is complete you have nothing to show for the money invested.
Whereas, if you purchase the car, all of the money spent goes towards your eventual ownership of the vehicle. It’s often said that you need to drive the car for a minimum of 3 years before you see any financial payback on purchasing rather than leasing the vehicle. But if you plan on driving that car into the ground, then you will more than benefit from buying the car. This even assumes the normal maintenance associated with owning a car that long.
There are other important factors to consider as well. You might be worried about the higher car payment that comes with purchasing a car. For example, you could be worried about the potential hardships from losing your job and rendering yourself unable to make the monthly payments. But truthfully, you might be more at risk with leasing the vehicle.
When you consider options like auto pawn and vehicle title loans, liquidity would be much easier to come by if you own your car. Borrowing against your vehicle is only possible if you own it. If you lease the vehicle you have no equity or ownership to borrow against, it is purely debt. These types of loans can be useful in any situation that you have a cash crunch. Perhaps you want to pay down credit cards, or you are having difficulty making another loan or mortgage payment. You can’t put a price on liquidity, after all, cash is king.