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Which is the Better Option; Car Leasing or Car Buying?

Jan 19, 2008
Buying or leasing; this is a dilemma all people venturing to buy a car often faces. There is no steadfast rule stating which the better option is; however both have their share of advantages and disadvantages which have be considered before making the final decision.

The capital cost is one of the factors for choosing between leasing and buying. People who don't have the capital to buy a car should consider leasing where you will only have to pay reasonable monthly installments. However if you can afford it, then you could consider buying a car either through an outright purchase or through a hire purchase scheme.

Though the hire purchase idea seems a good option, it is rather expensive as finance agreements are made here that have high percentage interest rates ranging between 20 - 25%. With this agreement, you may end up paying much more than the value of the vehicle at the end of the term.

By leasing a car, you don't actually own the car at the end of the agreement; however it does cover most motor related costs that won't get covered by a finance agreement with a dealership.

Buying your car may seem attractive; however you may suffer from high depreciation costs in the first 2 years where 20% of the value may be wiped out. Leased vehicles also suffer from the same problem but instead of you feeling the brunt of it, it is the leasing company that gets affected when they work at selling the car at the end of the lease.

On buying a car, remember that you will have to pay other costs for maintaining the car like insurance, car taxes, repairs and costs of damage or theft. Leased cars too face the same problems but as the leasing company is the stronger party here, overall costs are lower and are covered by the lease terms. And if your car is off the road, the leasing company also offers you a courtesy car. This offer is not available if you buy a car.

You could consider leasing a car to be a form of extended test drive for 2-3 years within which time; you get a feel of the vehicle and decide whether you want to buy the car at the end of the lease. However if you buy a car, you are stuck with it even if you find out that the car is not right for you. You could sell the car, but you lose in the process.

Though leasing cars seem to have most benefits, the largest benefit lies with buying cars where you are the sole owner of the car, and don't have to use the car following the terms stated in an agreement. And if your financial position changes, you are still the owner of the car. With a leased car, you will be bound with the terms stated in the agreement. Some leasing companies charge large penalties if you terminate or change the contract halfway through the lease period.

So on comparing the advantages and disadvantages of leasing and buying cars, you have to decide which option is better depending on your financial capabilities and if you want to be a 'full-time' or 'part-time' owner of the car.
About the Author
Mark Robinson writes for Auto-Loans.GuideFin.com. Visit his website for information about car loans for people with bad credit.
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