The Great Debate: Is Leasing or Buying a Car Better?

2013 Hyundai Accent near Chicago

There’s plenty of talk about the low cost of leasing, but there are also opposing views. Many people were brought up to believe that owning a car was always the best option. The thought of leasing a vehicle seemed like wasting money. However, not all situations are the same and sometimes a lease can be far better than purchasing a vehicle. Before you can decide whether leasing is better for your situation, you have to understand how leasing works. Until you know all the facts, you can’t make an informed decision.

Leasing a car has some similarities to renting an apartment. You agree to pay a designated price for a specific period of time. At the end of that time, the lease ends. If you decide to move before the end of the specified time, you pay a penalty in the form of an early termination fee. However, even though there are similarities to buying compared to renting a house, there are many differences. One of the biggest differences is that vehicles depreciate and houses normally appreciate.

Cars with lower mileage are worth more than those with high mileage so the dealer protects himself and the return value of the car by specifying total mileage for the lease. You can’t drive the wheels off the car and go over mileage without paying a penalty. Sometimes negotiating extra mileage at the time of leasing is possible. Sometimes, particularly for those who put thousands of miles on their car each year, leasing isn’t the best option unless they have a high mileage lease.

One area that many people fail to understand is that you can still negotiate the price of the vehicle when you lease. The monthly payments are based on the capitalized cost of the vehicle also known as the lease price. Just like negotiating the price of the car when you purchase it, you can negotiate the lease price, too. The lower the lease price is, the lower your payments are. You can even lower monthly payments more with a higher down payment.
Leasing also has benefits when it comes to monthly payments. Major manufacturers often offer excellent terms for leasing, compared to purchasing a vehicle. Hyundai low payments on leases can allow you to drive a more luxurious car than you otherwise would be able to afford if buying. This can be a benefit for those who use their cars for business and need to leave a good impression.

Since newer cars normally have a three year or 36,000 mile warranty, leasing for three years means you don’t have to pay for repairs as you would if you owned the car. Consider a longer lease if the warranty is longer. However, if you expose the car to undue wear and tear, such as minor accidents that leave dents and scratches, you’ll end up paying for it when you turn the car in to the dealer at the end of the lease.

When you lease, many times dealers require Gap insurance. That can be an extra expense you only have when you lease, but it is also a big benefit. When you own a car, the minute you drive off the lot, your car depreciates. If a truck hits you and totals your car, your insurance company only pays the depreciated value of the car, which is lower than the purchase price and maybe even the amount you owe the bank. The same is true for a leased vehicle. However, gap insurance covers that difference so there’s no out of pocket.

The final benefit of leasing is the lower cost of sales tax and the tax deductibility of the entire payment if the car is used for business. When you lease a car, you only pay sales tax on your down payment and monthly payment, not on the entire cost of the car as you do when you purchase. That can also be a considerable savings. There’s no right answer when it comes to whether purchasing is the best or leasing. It all depends on your circumstances, driving habits and beliefs.

If you are considering purchasing or leasing a vehicle, the representatives at World Hyundai in the Matteson Auto Mall will be happy to help you. Our experts can go over your financial budget and discuss your driving habits to see if a lease is something that you should consider.

About Joey

Joey is a blogger, social media representative, photographer, and videographer for World Hyundai Matteson! View Joey's Google Profile.