Thursday, September 9, 2010

Leasing VS Buying Part 3

Some people compare buying or leasing a car to a savings account. It's easy to see why. 

When you buy a car, you can think of it like this: you are putting money in a savings account that declines in value. You will never get out of it as much as you put into it. Part of every payment you make will disappear into depreciation and finance charges. When the loan is paid off, what you have to show is what is left over after interest and depreciation are through with it. Therefore, it can be said that a car is a terrible investment. But then, most people don't buy cars as an investment. 

Leasing is similar to buying but there is not savings account (no equity.) You will pay for what you use and won't have to put anything into a savings. At the end of the lease you will own nothing - you won't have a car to show. But you also won't own the depreciated part of the car that a buyer would have to deal with. The amount that a car depreciates is gone no matter whether you lease or buy. 

When you lease a vehicle, you can use the money you save every month and put it into a savings account or mutual funds that will increase in value. Experts encourage this, but the majority of people will use that extra money for things like bills and groceries. 

You will build ownership equity when you buy but you will not when you lease. Buyers receive equity because they pay higher monthly payments, essentially purchasing the loan. Part of those payments goes towards the equity. On the other hand, leasing will give you lower payments every month but no equity. 

You should be away that it can be more complicated to lease than to buy. You need to make sure that you read all the fine print so that you will know exactly what is going on with your lease. 

Another thing that you should keep in mind is that while you can buy your car at the end of the lease, you will actually be paying more than if you simply bought the car outright. This is because fees that are added in often make it more expensive. For some though, this may be the very best option that they have, and the only way that they will be able to get a newer vehicle. 

Let Manly Automotive Group help you in your new and previously owned vehicle choices today stop by our website today and drive away knowing that you made the right choice with us! Manly Auto can also can be found on Twitter and Facebook stop on over and visit us!

1 comment:

  1. Thanks for the info! Keep up the great work on this blog!