Is leasing a car a good idea? It really depends on whom you are talking to, the answer you will receive. If you are talking to a car dealer or a person who leases cars, he will share with you numerous reasons to lease. You can get a brand new car every few years. Your car will stay under warranty during the lease, so you do not need to worry about any major repairs. It can bring you peace of mind because ultimately things will be taken care of.
Leasing is basically renting a car for three years. Every month you are paying the price for the privilege of driving that car. It is the same as renting an apartment versus buying your own home. Many people think it is foolish to throw that much money away on an apartment every year when you could be building equity in your home. You are throwing money away every year that you lease, because you are not working towards car ownership. The biggest difference is your home is going to appreciate in value, while your car will depreciate over time. After a car is three years old, it holds its value fairly steadily for several years. You take the biggest lost the first three.
When you buy a car, you are building ownership. If you needed to you could sell your car to raise money for an emergency. If you try to break a lease then you have to buy it out through the dealer. This costs you a lot more money. If you can not afford the payments to buy the car that you want, then you may consider leasing because you would be driving the same car for less money. In the long run the payments are lower, but it is money that you are just saying good bye to. It is not being invested in anyway.
You can buy a good quality used car, that is two or three years old, and not lose the initial depreciation that comes with a buying a new car. Cars are built to last for much longer than three years, and so you should not be looking at any major repairs for several years. You can plan for these repairs by setting up a sinking fund for car repairs. Once you have done this you will save money over the leasing options, but still have the same peace of mind that comes with a warranty. If you want a new car every three years, you can save for one, and purchase a new-to-you car every three years. Ultimately you will come out ahead in this equation.
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