When is buying a car better than renting

To some extent, almost every driver looking for a new car faces a big problem: is buying or renting better?

Unfortunately, there is no universal answer. How to buy a car depends largely on people's priorities – whether you can get the best deal economically, whether you can enjoy the luxury of buying a new wheel every few years, or driving a car than you A more expensive car that can afford it. When it comes to reaching the best deal, buying is usually much better than leasing. It also gives you more flexibility in using your car.

Main difference

When people decide to rent, it is usually because they are concerned about the short-term situation. Leases usually require less down payment, which is characterized by less monthly payments than loans. The reason is that when paying a loan, the principal is the value of the entire car divided by the number of months of the loan. So if you buy a $27,000 car and get a three-year loan, you will pay a monthly principal of $750 ($27,000/36 months = $750). Of course, you are also responsible for the interest.

However, for a lease, the monthly fee is only equivalent to the estimated depreciation of the car, not the full purchase price. Suppose the dealer estimates that the car will lose half of its value during the three-year lease period, and when the charter returns it to the dealer, it will be worth $13,500. The principal is only $375 per month ($13,500 depreciation/36 months = $375).

Does this mean that leasing makes more sense from a financial perspective? Usually, the opposite is true. Unless you have the habit of buying and selling cars every few years, loans can be a more cost-effective method. Why? Because even if you pay less in the first few years, you have no equity in the car when the lease expires. So if you want to keep this car, you have to get it at $13,500 (see Car Rental: Should you choose to buy it?) And because leasing tends to bring higher financing costs and upfront costs – leasing starts Fees are a common example - you might buy a car from the start.

Reason for purchase

In addition to the low cost in many cases, there are other advantages to buying:

Flexibility - If the mileage you travel on the road exceeds the average of the average driver, then you must pay attention to the mileage limit at the time of the lease (usually 12,000 or 15,000 miles per year). Please note that according to MarketWatch, the driver travels an average of 15,000 miles per year. The lease will also link you to the car during the term of the contract. Although buyers can try to sell their wheels at any time, if they return their car early, the tenant will usually face an early termination fee.

Customization capabilities - Some drivers like to put their own imprints on the car, whether it's installing a new sound system or adding a unique hubcap. However, if you rent, the dealer may want you to undo these changes so they can more easily sell them to other consumers. If your modification causes any damage to the car, you are likely to get into trouble.

Simplicity - Even experienced tenants often don't understand every detail in a lease contract, which can be quite complicated. Buying is often a more straightforward process that eliminates hidden costs.

Rule exception

What are the benefits of leasing? of course. Leasing allows you to buy a more upscale car because of their lower down payment and lower monthly fees. If you want to impress, or have a job that requires you to take the customer away, that is a big benefit. Some people just like to drive a new car every few years, especially now that technology means that a car changes more than it looks or even drives. As the recent article in The New York Times said, the car is evolving into a "smart phone on wheels." If this is important to you, renting a car may be a worthwhile choice. Keep in mind that you may pay more in the long run than buying a car and saving it for a decade or so.