Financial Blogs across the internet have long discussed whether you should be buying or leasing a car. Twenty years ago, if you wanted a new car, you’d probably have stump up the full amount in cash. There was the option to lease, but due to interest rates being so hire, the cost of repayments made no sense. Today, there’re a few different credit packages from Long-term leases to personal credit purchase (PCP).
The key reason for the question, is down the financial crisis of 2008 which has led to a huge reduction in interest rates and therefore a major reduction in the repayments. On the downside, it’s meant people now have access to better and more expensive car’s that usually they would not be able to afford, but on the upside, there’re some very good deals floating around.
Buying VS Leasing
Personally, it really depends on how much you’re actually going to use the car in the first place and more importantly, what you’re going to use it for. I have friends in London with a £50K BMW sat on the driveway depreciating in value each day. They use at best once a week and usually simply to drive to lunch at the weekend. Does it really make sense?
According to statistics, buying a car is the second biggest expense after buying a house. Remember, this is buying or leasing a car in retirement, not when you’re trying to get to retirement. When your saving money to retire, it makes no sense other than buying a car and running it into the ground. Personally, we’ve bought two cars, both were a year old when I purchased them and come with low miles.
Realistically they will be problem free for the next ten years and should last 15 years before they need to be replaced. For two £25,000 cars, this makes good financial sense, but I would hate to be in my late 70’s and have a problem with car or be running around trying to buy a newer car. Buying cars works for my family, but rather than making a decision, we’re going to look at the Pro’s and Con’s of each and let you decide.
Buying A Car
Buying a car is expensive and many people usually go straight to the second hand market, particularly when it is so easy nowadays to find a bargain online. If your mind is set on buying a brand new car, you may be looking at getting a loan or getting on a financial plan. Whichever way you decide to go the car will be yours to do with it as you wish.
Pro’s Of Buying A Car
- Once you have paid off your car loan you no longer have monthly payments to make. The car is all yours.
- If you buy a car, it’s your car to do what you wish; within legal parameters.
- You can trade it for another car or you can sell it for the money.
- In time buying a car will cost less than leasing a car.
Con’s Of Buying A Car
- You initially need to pay a lot more money. Even if you take out a loan or buy the car on a finance plan you will probably be paying more per month than on a lease.
- Though you always have the option of selling your car, its value will start depreciating as soon as you buy it.
- The car often becomes more expensive after its warranty has expired.
Leasing A Car
Leasing a car is pretty much renting out a car on a long term basis. You’ll have to put down a deposit in the beginning, but in the short term it is the cheaper option
Pro’s of Leasing a Car
- While it costs you more to lease a car over time, it is a lot cheaper in the short term. That means you could afford to lease out a much nicer model than you could buy.
- Tax breaks maybe available if you use the lease car for work.
- You can change your car with the company for better model at any time.
- The car is always under warranty.
Con’s Of Leasing A Car
- Just think how difficult it is to broke a mobile phone contract. A car lease is the same except it is a lot more expensive. Can be a problem when you are finally ready to buy, but still have 18 months left on your lease contract.
- Need a stable job to lease a car. If you lose your job or your business has a bad few months at the leasing company will still expect you to pay for the car.
- You are expected to maintain it properly.
- There will probably be lots of terms and conditions in the contract that require you to pay a fine if you break them.