The Contrasts Between Car Hiring and Purchasing, And A Few Advantages And Disadvantages Of Both

By Lesley Long

Getting a car is an exciting prospect but you may not be sure whether to lease a car or buy it. The following aims to shed some light on the differences between the two options, which should help you in deciding whether you want to follow the car and leasing route or the purchasing route.

If you take out a loan from a bank in order to buy a car, you will have to pay the loan back in monthly instalments plus interest. Every time you make a monthly payment the overall amount you owe the bank reduces, which means you'll pay less interest as the months progress because the amount you're paying interest on is reducing. As an example, you get a 10,000 loan and buy the car, and after a certain number of months you have managed to repay the bank 3,000 plus interest. Now you're only paying interest on 7,000 instead of 10,000.

With car leases on the other hand, you are not paying to purchase the car but are instead paying for the use of the car. Included as part of using the car are the depreciation cost (how much the car decreases in value from its purchase price whilst you're using it), as well as excessive wear and tear and mileage during your lease period. When you lease a car from a vehicle leasing company, the company has already bought the car before leasing it to you, which means you pay interest on the car's purchase price (for instance a purchase price of 10,000). However, since with car leasing you are paying for the use of the car and not the purchase of it, that 10,000 amount will never decrease so you will be paying interest on 10,000 for the duration of your lease agreement.

A convenient benefit with taking out a car lease is that you never need to go through the hassle of selling the car since when the lease period is finished, all you do is return the car to the car leasing company and it is they who have the task of selling the car. The monthly lease payments are more often than not going to be more overall during the lease period than purchase loan repayments would be, but every couple of years you have the option to get a new car when your lease expires. Maintenance costs throughout the lease period should also be relatively low since the lease car will be new at the start of the lease.

If you buy a car and want to sell it a few years down the line, the depreciation cost will mean you're almost always going to make a loss in comparison to what you paid for it when new. Maintenance costs will also likely increase as your car gets older. One of the benefits of a purchased car over a lease car however is that you can modify it since you own it but you are not allowed to make modifications on a lease car.

About the Author:

Grab The Post URL

HTML link code:
BB (forum) link code:

Leave a comment

  • Google+
  • 0Blogger
  • Facebook
  • Disqus

0 Response to "The Contrasts Between Car Hiring and Purchasing, And A Few Advantages And Disadvantages Of Both"

Post a Comment

comments powered by Disqus