Should You Lease or Finance
June 08 2018, Destination Mazda
Should You Lease or Finance?
Are you in the market for a new vehicle? Should you lease or should you finance a car? What is the difference between the two options? It's a question that everyone seems to have an opinion about. There are a number of factors that can influence whether you should lease or finance a vehicle. Here are a few things to consider before making your decision.
How much you drive?
The amount of kilometers you put on your vehicle on a yearly basis could influence your decision to lease or finance. Certain lease agreements normally only allow you to put a certain number of kilometers on the vehicle per year and may charge a rate for every kilometer if you go over. Financing may be a better option for those who drive frequently and far. If you decide to lease, read your leasing contract carefully to learn if there is a cap and other restrictions.
What are you using the car for?
While some people view driving as a chore, others view driving a pleasure. If you spend a lot of time in the car and highly value comfort, you may be attracted to models with luxury features such as heated leather seats, efficient climate control, spacious interior, and a high-end entertainment system. Therefore going for a lease may be an affordable way to allow you to drive a higher end model.
Depending on the terms of the contract, at the end of the lease you may incur some additional fees on wear and tear or damages. Therefore pay close attention to your vehicle and set aside a budget in advance. In addition, lease payments can be deducted from your taxes if you use your vehicle for business purposes. Speak with an Accountant to find out more about deduction.
How long you plan on keeping the car?
How many years you do plan on driving the vehicle? If you continually lease a vehicle, monthly payments are lower, but they never end. If you decide to finance a vehicle, payments will end and the car will become your asset. If you enjoy innovative new technologies, seek the latest style, or cannot picture driving the same car for many years, leasing gives you the flexibility to switch your vehicle every few years.
What is your monthly cash flow?
Lease payments usually are lower compared to financing payments on a monthly basis. This is because when you lease a vehicle, you're paying for the depreciation of the car during your term rather than the full cost of the vehicle if you were to finance. Think about your monthly income flow, and evaluate how much money you can put towards a payment.
Both leasing and financing affect will affect your monthly cash flow therefore you should understand the math behind each option and the impact on you. Interest rates, down payments, frequency of payments are all important factors; therefore take the time to research which option works best for you and your situation in the long run.