Friday, December 9, 2011
To buy or lease?
If you’re interested in a new car, the question typically arises: Should I lease or buy? As is often the case, it depends on your individual situation. Many people equate leasing with renting but it may be more useful to consider leasing as financing the use of a vehicle whereas buying with a loan finances the purchase of a vehicle.
Your lifestyle, your priorities
As you think about whether to lease or buy a new vehicle, it’s important to make financial comparisons but it’s also important to consider your lifestyle, your objectives and personal priorities — what’s important to you.
If you …
Enjoy driving a new car every three or four years; want lower monthly payments; want a car that is always under warranty; don’t want to trade or sell used cars; don’t care about building equity in your vehicle; have a predictable lifestyle and drive an average number of miles per year1; properly maintain your cars and are willing to pay more over the long haul to get these benefits, then you may want to consider leasing.
On the other hand, if you …
Value long-term cost savings over lower monthly payments; enjoy owning your vehicle and would like to pay it off and be payment-free for a while; don’t mind the unexpected cost of repairs after the warranty has expired; like to customize your vehicle; drive more than the average number of miles per year and don’t mind higher monthly payments, then you may want to consider buying your vehicle.
Caveat: Lack of flexibility
Some consider the inflexibility of the lease agreement a significant drawback of leasing. If you want or need to terminate your agreement before maturity, you will likely pay a significant penalty for early termination. In many cases, the penalty may equal the remainder of payments due under the agreement. So before you enter into a lease make sure your lifestyle and ability-to-pay are predictable and stable.
Contact me at 713-688-8669 or visit www.farmersagent.com/dlorms
Visit http://www.smartmoney.com/calculator/autos/buy-or-lease-a-car-1302833645461 for more information about leasing. When you decide which option you feel is appropriate for your situation, call me. We can sit down and review your coverage and options so you can be sure you have the insurance you want to go with your new ride.
1According to SmartMoney, the average American driver puts about 12,000 miles per year on his or her car. (http://www.smartmoney.com/calculator/autos/buy-or-lease-a-car-1302833645461)
The Case for Leasing
Allows you to get a new car frequently
Provides short-term affordability
Results in fewer repair bills
Avoids upside-down loans
The Case against Leasing
You don’t own the vehicle
Penalties for early lease termination
Additional charges for excessive mileage and any damage to the vehicle
Must buy or return car at end of lease