Lease or purchase – which form of van purchase should I choose?

Choosing between buying and leasing is often difficult. On the one hand, buying comes with higher monthly costs, but you end up owning an asset – your vehicle. On the other hand, leasing has lower monthly payments and allows you to drive a vehicle that may be more expensive than you could afford if you bought. But you get caught in a cycle where you never stop paying

Buying a vehicle through a conventional method like a car loan is fairly simple: you borrow money from a bank, cooperative savings and loan association or other lending institution and make monthly payments over a certain number of years. Part of each payment goes toward paying interest on the loan, and the rest is used to pay down the principal. The higher the interest rate, the higher the payment. You can keep the car as long as you want and treat it as well – or poorly – as you want. The only penalties for modification or abuse can be repair bills and lower resale value in the future. A loan calculator can help you choose.

As car prices rise , and buyers begin to demand the latest safety features that are only available on newer cars, leasing a vehicle has become a major alternative to buying. With leasing, buyers make a monthly payment to drive a new car for a set period of time. This payment is often less than the monthly cost of financing a new vehicle, but buyers must return the car at the end of the lease term.

With more people than ever working from home, lease mileage restrictions may not be a favorable factor for many buyers. On the contrary: many may find that they are not using the number of miles paid.

The predictability of payments and cost of ownership (no expensive repairs under warranty!) has its appeal. But life can be unpredictable, as we all learned in 2020, and leasing is less flexible than buying.

To find out if leasing or buying is right for you, we’ll look at the pros and cons. Aside from that, if you want to see how leasing is priced a calculator will be a great tool.

The pros of leasing

On the surface, leasing can be more attractive than buying. The monthly payments are usually lower because you are not paying back any capital. Instead, you simply borrow and pay back the difference between the car’s value when new and the car’s residual value – its expected value at the end of the lease – plus finance charges.

• You drive the car for the most trouble-free years.
• You always drive a newer model vehicle, which is usually covered by the manufacturer’s warranty.
• Your lease may even include free oil changes and other scheduled maintenance.
• You may drive a more expensive, better-equipped vehicle than you could afford.
• Your vehicle will be equipped with the latest safety systems.
• Business owners can receive significant tax benefits.
• In the end, you simply leave the car at the dealership.

Disadvantages of leasing

While leasing may seem attractive, there are a number of disadvantages:

• Ultimately, leasing usually costs you more than the equivalent of a loan because you’re paying for the car during the period when it depreciates the fastest.
• If you lease one car at a time, the monthly payments go on forever. In contrast, the longer you keep the vehicle after paying off the loan, the more you get out of it. In the long run, the cheapest way to drive is to buy the car and keep it until repairs are unaffordable.
• Lease agreements specify a limited number of miles. If you exceed that limit, you will have to pay a penalty for the extra mileage. So be sure to calculate how much you plan to drive.
• If you don’t keep the vehicle in good condition, you will have to pay additional wear and tear fees when you return it
• If you decide you don’t like the car or can’t afford the payments, it could cost you. You’ll likely be stuck with thousands in early termination fees and penalties if you cancel your lease early – all due immediately. These fees can equal the amount of the lease for the entire term.
• With a few exceptions, such as professional window tinting, you must bring the car back in the condition it left the showroom, minus normal wear and tear, and configured as it was before the lease.

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