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Should You Lease or Buy a Car: Ownership or Rental?

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Whether you should lease or buy a car depends on both the car and you!  Owning your car might seem the right thing to do, but is it the most economical solution to car ‘ownership?’ For many it is not, and we are not discussing corporate here, but personal use – whether or not you are personally better to lease or to buy a car.

Should you lease a new car, or should you buy one? Like most financial questions, the answer depends on your situation. For some people, leasing a car presents distinct economic advantages. For others, buying a car is the way to go. Car ownership is important to many people who would never consider rental or a leasing agreement where they are the virtual owners but not in fact.

These are the personal arguments, but what about the financial reasons in support of car ownership or leasing? First off, leasing is not the same as renting or hiring a car, because both these terms infer short term use. A car can be leased for its useful lifetime and then be replaced with a new model, and is generally much cheaper over a specific time scale, such as daily, than an auto rental agreement.

Benefits of Car Ownership

Obviously the car is yours and you can do what you want with it. You can pimp it, loan it out and even sell it. If you need a loan for any reason, you can use your car as collateral. You can hire or lend it out to a friend for his vacation, or even destroy it if you want. In short, with car ownership, you car is yours and you can do whatever you want to with it.

Disadvantages of Car Ownership

Car Ownership or Lease?When deciding whether to lease or buy a car, also consider the disadvantages of car ownership. A major problem with owning your own car is that as it ages you have to put up with it – or buy a new car! If a new model comes on the market, you have to buy it yourself.

When interest rates are high your car loan will not be as good an arrangement as a leasing agreement. If you like to have a new car every three or four years you will find the trade-in value of your old car will depend on how you have looked after it and kept it free of damage.

Fundamentally, when you own a car you are totally responsible for it, its condition and its age, and you will be owning a depreciating asset (though all is not what it seems – see below under disadvantages of leasing a car.)

Lease or Buy a Car: The Benefits of Leasing

First, you do not own it, and if you like changing your car regularly it is cheaper to lease! If you like the look of that new 2012 Hyundai Genesis SUV for your family, then you can have it without having to sell your current car first.  If you are drooling over the 2013 Mustang then you can let your leasing firm know in advance – and it will be yours!

When interest rates are high, you will pay significantly less for your leased car than for an auto loan.  Once your lease period is over just hand back the car without worrying about how to get rid of the old one. In fact, lease payments are usually less than car loans, and you can drive a fabulous car you could never afford to purchase!

Disadvantages of Leasing a Car

It’s not yours – whether you lease or buy a car that is the main difference. Another is that your insurance will be higher on a leased vehicle, because you do not arrange it – the leasing company does. Also, although you may not know it, depreciation on the car is factored into your payments – so that’s one advantage annulled right away!

Whether you lease or buy a car is normally a matter of personal preference. However, if you are running a business, it is generally preferred to lease corporate car fleets than to purchase them.  It is simpler to update vehicles to new models, and the finances of leasing versus ownership favors leasing with respect to tax.

To find out which of these options is best for you, you should seek the advice of a financial adviser. He or she will help you decide whether you should lease or buy a car.

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Trace Richardson has written 638 articles on BankChirp.com

I'm Trace Richardson and am the founder of LeadPress. I’m a licensed California Real Estate broker and a former equities trader previously holding the Series 7, 63, 55 and 24 securities licenses.

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