Pros And Cons Of Leasing Vs Buying A Car

If you want to buy a car and don't have enough money, you can opt for financing a car for personal needs, purchase loans or leasing. Leases and purchase loans are the most common methods of automobile financing. Leasing vs Buying a Car- what's the right solution for your needs?

Leasing is one of the most used forms of financing, being affordable for most individuals who want to pay for only a portion of a vehicle's cost. Leasing operation is an alternative to bank credit, for proper purchase of cars, machines or buildings.

The leasing company provides the right of using the car to an individual or company, for a certain period of time. The first payment must be made at the time when signing the contract -- for the month ahead. At the end of the lease, the client may buy the car or extend the leasing contract. The car can be bought either at the end of the lease, or after 12 months from the beginning of the contract. Lease payments involve a depreciation charge and a finance charge.

The leasing company will ensure the car, but insurance costs will be supported by the user. The monthly rates can be reduced by paying the residual value (20% of the car value) at the time when the contract ends. The initial commission is applied to the total value of the car. Early repayment can be made at least 12 months after signing leasing contract. Traveling outside the country by car requires the consent of the leasing company.

Buying a car involves the purchase of a vehicle, paying for the entire cost of the vehicle. The client must make a down payment, being also responsible for paying an interest rate, based on his credit history and sales taxes in cash. The first payment must be made a month after signing the contract. Loan payments consist in a principal charge and a finance charge. Buying a car builds equity, while leasing doesn't.

In case if buying a car, the monthly payments are higher. The client is also responsible for unexpected cost of repairs after warranty has expired.