As many young people begin their careers, they may find that it is time to purchase a new car. There are many things to consider—what kind of car, new vs. used, vinyl or leather seats. Of course, one of the most important things to ponder is the option to buy or lease. Though no one decision is right for everyone, Jason Hartman encourages you to make an informed choice in the matter.
Leasing is an attractive option for those who wish to have a new or different car every couple of years. New cars offer consistent reliability and quality that many potential buyers find appealing. Payments tend to be similar to traditional car payments, and offer reasonable interest rates.
The best argument for leasing is in the idea of depreciation. Automobiles depreciate quickly, and are often subject to substantial repairs that result in large bills. When a vehicle is leased, it can be returned to the dealer, allowing the lessee to simply walk away.
Buying is an appealing option, because unlike leasing, you have something to show for your invested money. When a lease term is up, the potential buyer can either walk away, lease another car, or purchase the car they’ve leased. Buying a car ensures a tangible reward at no additional cost.
When making your decision, consider:
- How many miles you drive—leases have mileage requirements and charge extra when you go over.
- Possible tax deductions—sometimes cars driven for business purposes can be leased and that expense can be written off.
- Initial fees/down payments—depending on your monthly cash flow, this could be your deciding factor.
- Your flexibility—if you think you might join the Peace Corps and leave town for a few years, a lease may not be the best (as they are expensive to break). Owning a car means you’ll be able to sell it whenever you want.
Ultimately, leasing provides a better deal in the short term, while buying is the better bet for a long-term investment. The choice is ultimately dependent upon the situation—some individuals don’t mind the continued lease payments in exchange for a nicer, newer, more updated car. Others can’t reconcile the lack of tangible reward in the end and opt for a car that can still be sold.
Weigh your options and proceed with a thorough understanding of your situation. Then, roll down the windows, put in your favorite tunes, and enjoy your new ride. (http://www.flickr.com/photos/marcp_dmoz/3497114253/)
The Young Wealth Team