Should I lease or buy my next vehicle? This is undoubtedly one of the questions most often asked by consumers. But what exactly are the advantages and disadvantages of leasing and buying in the automotive sector? This is what you will discover in this article.
Location
As its name suggests, leasing allows you to rent a vehicle for a period of approximately two to four years. It is primarily aimed at consumers with a tight budget and who do not travel a lot.
Advantages
The main advantage of renting is that it is more affordable in the short term than buying. A rented model will most of the time cost less monthly than the same model purchased. It must be said that compared to a purchased vehicle, a leased vehicle is only partially financed, which allows monthly payments to be reduced.
Thanks to lower monthly payments, leasing allows you to get your hands on slightly more luxurious vehicles or even change models more frequently.
At the end of the rental, if you do not want to keep the vehicle, you can return it to the dealership (subject to certain conditions). It’s perfect for people who aren’t salespeople at heart. You will not have to manage the paperwork, appointments and other essential steps when reselling a vehicle.
The inconvenients
Since you do not own the vehicle, you must respect certain conditions. The most restrictive is undoubtedly the mileage restriction. Generally, you can travel 16,000 to 24,000 km annually with a rented vehicle. And you have to be careful not to exceed this limit, because it can be expensive: 10 to 12 cents per excess kilometer.
When you return the vehicle at the end of the rental, it will have to undergo a rigorous inspection. And don't expect your dealer to give you any freebies. Dealers are now very picky and expect the vehicle handed over to be almost impeccable. They won't hesitate to charge you for anything beyond normal wear and tear, like scratched rims, broken lower bumpers, chips on the windshield, or overly worn tires.
Although leasing offers lower monthly payments, the interest rate is often higher. Each dollar borrowed therefore costs you more than if you had purchased and financed the same model.
Do you want to return your vehicle before the end of your rental contract? It’s possible… provided you pay the price. Canceling a rental contract is indeed very costly. The other option would be to transfer your contract to a third party, but again, expect to pay fees.
At the end of your rental, your dealer will surely offer to buy the vehicle. Depending on the model, the residual value, that is to say the amount to pay to acquire the vehicle, may be higher than if you had originally purchased the same vehicle. Different calculators allow you to properly evaluate these costs.
Procurement
The purchase will appeal to consumers who want to have greater independence and keep their vehicle for a long time.
Advantages
After repaying your loan, a purchased vehicle is yours. You will only have to pay for maintenance, repairs and insurance; you will no longer have monthly payments to make to your lender. You will also be able to obtain an attractive resale value depending on the market.
Purchasing allows more flexibility for consumers. In this case, there are no restrictions on mileage or wear. Plus, you can modify your vehicle without worrying about your dealer charging you a fee when you return the lease.
The inconvenients
The purchase has certain disadvantages. The most important is the cost. Monthly payments are usually higher for a purchased vehicle. Sometimes, monthly payments can even be up to twice as high compared to leasing.
The resale value of a purchased vehicle can also be poor. For example, if your vehicle has a lot of mileage or if it is damaged, you will receive less if you resell it.
Finally, the resale process can be long and tedious. Among other things, you have to take photos of your vehicle, post a classified ad on a site, manage messages and calls from potential buyers, and fill out paperwork. Additionally, finding a buyer can take weeks or even months.
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