Honolulu Hot Steals: Should I Lease Or Finance My New Set Of Wheels?

Key Takeaways:

• Leasing a car is a great way to get a new car every few years without worrying about selling or trading your old one.
• Financing a car allows you to build equity in your vehicle, but it also means you’ll have to make payments monthly for the life of the loan.
• There are pros and cons to leasing and financing a car, so it’s important to weigh your options before deciding.

Are you prepared to purchase new wheels? For most families, a car represents a significant expenditure. Recently, more people are leasing new cars rather than buying them; leasing accounts for roughly 30% of new automobile purchases. In this blog post by Cutter Mazda Honolulu, we will learn the advantages and disadvantages of financing versus leasing and make the best decision for you.

Those who have never leased a car may find the process difficult, complex, and more suited to company owners (who may be able to deduct the cost) or people who cannot make automobile payments. These opinions, however, might be out of date. Car purchasers need a firm grasp of the various buying processes before writing off leasing as a financing option.

Financing: Benefits

The possibility of eventually owning an automobile is the biggest advantage of financing a car because you are building equity in the vehicle. Leasing is a long-term rental; therefore, you must return the car after the lease contract or pay the residual value to buy it outright. In a lease, unless you decide to buy the car, you have no equity in the vehicle. When you finance, however, the car is yours to do with as you please once the loan has been repaid. You can keep, sell, or trade it in without restriction.

Financing: Disadvantages

The primary disadvantage of financing is the higher monthly payments that result from having to repay both principal and interest on the loan. Lease payments are typically lower because you’re only paying for the car’s depreciation during the lease term plus any rent charge levied by the leasing company. In addition, if you put money down when you finance, you may be required to carry collision and comprehensive insurance coverage on the vehicle, which can add to your monthly costs.

Leasing: Benefits

Leasing a car can provide you with several benefits. Leasing usually requires little or no money to keep your monthly payments low. In addition, most leases are only two to four years, so you can always drive a new car without worrying about repair bills for an older vehicle. Leasing also allows you to trade your car for a new lease at the end of the lease term.

Leasing: Drawbacks

There are a few drawbacks to leasing that you should be aware of:

• You will never own a car. You will only use it for the length of the lease.
• Most leases have mileage restrictions, so you may be charged additional fees if you exceed the allowed miles.
• At the finish of the lease agreement, you will need to turn in the car and may be charged for any damage beyond normal wear and tear.

Financing Or Buying Is Best When:

You plan to keep your car for a very long period.

The average automobile owner keeps a new car for 6.5 years. Financing is often the superior choice if you want to keep yours for that long, especially if you can pay off the loan over that period and develop equity.

You commute a lot.

Most leasing businesses impose a 12 to 15-cent fee for each additional mile traveled (often 10,000 to 15,000 miles annually), which can add quickly. Although you may have to pay more for the lease, you can bargain for a larger mileage cap.

You treat automobiles harshly.

Financing is typically the best option if you have small children or transport heavy equipment in your car. A little wear and tear are acceptable when returning a leased vehicle. You will be charged for damages if the automobile is not near its original state. Additionally, you might need proof that you performed all the advised oil changes, tire rotations, and tune-ups.

You don’t have perfect credit.

Getting a car loan is simpler than finding a suitable lease offer, especially if your credit is being rebuilt. In 2017, new lessees’ average credit scores were 703, according to data.

Leasing Is Better When:

You work for yourself and use your automobile for work.

Depending on how frequently you use the automobile for work, you might be able to deduct your lease cost. For instance, you may write off $150 per month as a business cost if your lease payment is $300 per month and you use your automobile for work 50 percent of the time.

But there is a catch. You must reduce your deduction by an “income inclusion” amount if the car’s worth exceeds a specified threshold. If you rent a car or another piece of property for work, you could also need to record this additional income.

In conclusion? For self-employed individuals who drive for business purposes, leasing offers tax benefits, particularly for more expensive vehicles. If you’re self-employed, you may write off business-related automobile expenditures, including tolls, parking fees, petrol, insurance, garage rent, registration fees, lease payments, and maintenance.

You’re constantly looking for the newest, most technologically advanced vehicle.

Most of the time, it is not economically sound to finance the whole cost of an automobile that you intend to maintain for less than three years. An automobile may still be worthwhile if it is anticipated to have a higher-than-average resale value. So, if you decide to lease a vehicle that is among the latest makes and comes packed with the best auto features, you are making a wise decision.

You desire lower monthly payments and up-front fees.

Leasing requires you to pay interest and fees on the difference between the sticker price and the car’s anticipated worth after the lease. Sometimes, you won’t even need a down payment if your credit is great. Leasing a car is usually more affordable than buying one in the short run.

In conclusion, it is up to you to weigh the benefits and drawbacks of leasing vs. buying before deciding. Depending on your requirements, pick the one that will work best for your financial path.

Cutter Mazda Honolulu, serving Honolulu, HI, is always prepared to help with financial goal-solving strategies. Fill out our application to find out whether you’re pre-approved for a quick vehicle loan, and you’ll get a reply right away!

Apply for financing today!

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