Leasing Vs. Buying a New Carby Nichelle Coleman
Whether you decide to purchase or lease a car depends on what your needs are at the time. Many people prefer to lease because they can drive a new car every two years. Although lease payments are usually smaller than for buying a car, many car buyers prefer not to lease because over a period of time they have paid more in monthly payments for vehicles that they do not own. Research both options to determine which one is right for you.
If leasing a car, your first payment is due the day that you sign your lease. A security deposit is also required the day that you lease. When a car is purchased, most sellers give the buyer a month before her first payment is due. Leased vehicles include GAP insurance, which is insurance that pays the difference in what your vehicle is worth and what you owe on your loan in the event that your car is stolen or totaled. Buying car options do not automatically include GAP insurance. It has to be purchased separately.
When you lease a car you are purchasing the ability to use the car for a certain period of time. When leasing a car, the seller grants the buyer a certain amount of mileage at the time of the lease. If the buyer exceeds the amount of granted mileage, there is a penalty after the car is returned. The lease contract advises the buyer the penalties of exceeding the mileage. In buying a car, the car can be driven by the buyer as much as he wishes and there is no penalty.
Leasing a car seems like the best option for most because they can have a new car every two years. Most sellers lease cars with a two-year option and after the two years has expired, the buyer can choose to keep the car or trade the car in to lease another new car. Usually leased cars come with lower payments but if the buyer decides to keep the car, there is a "balloon" payment due after the expiration period. The balloon payment is a large payment that is due to the seller as penalty for breaking the lease agreement.
If you decide to lease a car, you are not the owner of the car and the car must be returned to the seller at the end of the lease period. Buying a car means that you are the owner and you are responsible for it and if you decide to trade it in, you are responsible for its depreciated value. When you lease a car, you are not totally responsible for major repairs on the vehicle but if you decide to purchase a vehicle, you are sole responsible for any major repairs if the vehicle is not under warranty.
Most believe that when they lease a car, they do not have to follow the same financial guidelines as with buying a car. If you choose to lease a car, the seller will check your credit history just as with buying and if you do not make timely payments, it could affect your credit rating just as with buying a car.