What are the benefits and drawbacks of leasing a car rather than owning one?
According to Siegal & Yacht (2009), a car lease is an agreement to long-term rent a car, which also allows you to purchase this car at the end of the lease using the balloon payment. Such agreements can be different in length, but normally take up to 3-4 years. To decide, whether you need to lease a car, you can ask yourself several questions such as: for how long will you need a car? Are you going to sell it later to receive money for another purchase?
There are several benefits and drawbacks of leasing a car rather than owning one. First of all, sometimes it can be actually cheaper to enter a new lease, instead of buying another car. Depending on your leasing agreement, you can even save some money on maintenance which can be quite costly if you own a car. The warranty protection of leasing contracts usually lasts three years, which can also save a lot of money for the driver. So, leasing a car can be very beneficial when you need to control your monthly spending (McMillin, 2020). And, if you want a top-model car, but cannot afford to buy it – leasing is the right choice.
Speaking about the disadvantages, we need to remember that you save a lot of money simply because you get nothing – it’s like renting an apartment or a house – you do not own anything of your own there. This means, that you do not create any equity during the leasing period (at least, unless you decide to buy this car at the end of the leasing period). You will not completely control what you can do with this car, and there are even mileage restrictions: if you exceed them, you’ll have to pay a fine, which will actually increase the total rental cost.
Keeping all these advantages and disadvantages of leasing a car in mind, we can make decisions about whether we should choose to lease or buy the vehicle. There are several factors that can affect such decisions – from your driving habits and personal finances to the circumstances, personal plans, and current environment. For the last 6 years, I live in another country. My manager rents me an apartment, and I cannot afford to buy anything big – such as real estate or vehicles – simply because I am not sure what will happen to me even in the nearest future. When writing this homework, I actually decided that probably leasing a car can be not a bad idea in my situation – it will not only save my money a bit, but will be cheaper than simply renting a car, and I will not need to have a headache of selling it when I decide to move back to my hometown or another foreign country.
References
McMillin, D. (2020, August 11). Leasing vs. buying a car: Pros and cons. Bankrate. https://www.bankrate.com/loans/auto-loans/leasing-vs-buying-acar/
Siegal, R. & Yacht, C. (2009). Personal Finance. Saylor Foundation. Licensed under Creative Commons CC BY-NC-SA 3.0.