New cars are so expensive these days, and one wonders if there are any more affordable options? Lets’ compare leasing a new car with buying a new car.
A BusinessTech article of July 2016 highlights some pros and cons of leasing a car. In the US, about a third of motorists lease vehicles, but this is still in its infancy in South Africa. However, according to a January 2018 article by BusinessTech, more and more South African motorists are beginning to lease cars. They realise that they can avoid car depreciation, which starts after buying a car.
LEASING APPEARS TO BE A BETTER OPTION IN A DIFFICULT ECONOMY
Some motorists seem to prefer leasing a car, when challenged with increasing interest rates, fuel prices, and inflation. But most South African motorists are more used to buying a new car through bank finance.
WHAT’S A MAJOR DIFFERENCE BETWEEN LEASING A CAR AND BUYING ONE?
A person leasing a car will not own the vehicle at the end of the lease term. On the other hand, when you buy your car through vehicle finance, once you have paid off the car, it’s yours for as long as you want.
TERMS DIFFER FOR A LEASED CAR AND A BOUGHT CAR
While the term for a leased car is usually 36 months, motorists purchasing a car sign up for a bank finance contract lasting 12 to 72 months, depending on affordability.
WHEN LEASING, CHOOSE THE CORRECT ANNUAL MILEAGE
Choose the correct annual mileage right at the start of the lease. If you don’t, you’ll pay dearly for any excess mileage. In fact, any motorist contemplating a lease must ensure that he or she fully understands all the terms and conditions of the lease.
WHAT ARE THE ADVANTAGES OF LEASING?
There are definite advantages that the motorist can make use of.
WHAT ARE MONTHLY LEASE PAYMENTS LIKE?
Monthly payments on a car lease are considerably less compared with those when paying off a car. You may spend less money on leasing a car over a short term compared to having bought the same car and traded it in at the end of the same period.
THERE IS NO RISK WHEN RETURNING THE CAR AT THE END OF THE LEASE
With a purchased car, you’ll have to trade the car in at the end of a short term, but with a leased car, all you have to do is just hand the car back at the end of the lease term. In addition, you will never have to concern yourself about having to extend any service or motor plans. Without these plans, car owners are faced with increasing maintenance costs as the car gets older.
WHEN YOU LEASE A CAR, YOU CAN ENJOY DRIVING A NEW CAR ALL THE TIME
Leasing a new car will mean that you can enjoy driving a new car for as long as you like.
WILL LEASING A CAR MAY HELP YOUR BUSINESS?
Leasing a car for business purposes may result in tax benefits.
BETTER OPTIONS ARE AVAILABLE WHEN LEASING A CAR
Compared to purchasing a car, options are more flexible and attractive when motorists take out a lease.
WHAT ARE SOME DISADVANTAGES OF LEASING A CAR?
Let’s look at some of the disadvantages of leasing a vehicle.
THE CAP ON ANNUAL MILEAGE
This is most important challenge to deal with. Exceeding the annual mileage can cost you anything from R2 – R8/km, depending on the vehicle that was leased.
YOU WILL ALWAYS BE MAKING CAR PAYMENTS
When you buy a new car, payments end after a maximum of 72 months. However, when you lease a new car, you will always be making monthly payments.
YOUR LEASED CAR WILL BE STRICTLY AUDITED WHEN RETURNED
This may prove to be quite costly if you haven’t looked after your car. The car will be carefully inspected, and you will have to pay for any damage other than normal wear and tear.
DON’T TERMINATE A LEASE PREMATURELY
Try and avoid terminating a lease before the end of its term, as it may prove costly.
So when should you lease a car or buy a car? If you want to perpetually own a new car, and change it every 3-5 years, then leasing a car might be for you. However, if you wish to own a car, your monthly payments do stop after a maximum of 72 months. If your car is a good, and reliable make, your maintenance costs may not be that high. You need to carefully consider your financial needs before making a decision. To have peace of mind, why not contact Prime Meridian Direct to obtain affordable car insurance?
Also view:
Vehicle Finance, Car Insurance and Road Safety
Buying and Selling a Vehicle – Informed decisions and the Vehicle Retailer
The Online Vehicle Retail Market and Safely Selling Vehicles Online