When you're getting a new vehicle, you've got lots of decisions to make. Compact or Sedan? Standard or Automatic? Are heated seats really worth the extra money? And then comes probably the biggest decision of all – how are you going to pay for it? Should you lease or buy?
While many people have opinions on this topic, there really is no right answer. Both options have benefits.
Leasing a car
When you lease, you make monthly payments in exchange for the exclusive use and possession of a vehicle instead of actually buying one. So this is a great option if you want to drive a new vehicle every few years.
However, it is very important that you become aware of the conditions that come with leasing. For example, there is often a maximum number of kilometres you can drive in a year (over the course of the lease), the vehicle must be regularly serviced according to the terms and conditions of the lease and there are penalties if you break the lease before the end of the term. A lease is typically financed through a dealer and some Financial Institutions do offer this service.
Buying a car
When you buy a vehicle, you usually get financing, either at the car dealership or directly with a bank, so you're still making monthly payments. Car loans can range from 1 to 8 years so that monthly amount can really vary to fit your budget.
You also have the flexibility to pay your loan off faster by making additional or doubled up payments. And once your loan is paid, you'll have a fully-owned vehicle. The best part is, those monthly payments will stop, freeing up cash for other things.
The decision really comes down to a few questions you’ll need to ask yourself:
For what purpose will you use your vehicle?
What you can afford?
Will you want to upgrade every few years, or will you have your vehicle for 5 years or longer?
How much will you be driving it?
For the vehicle you're looking at, how do the lease payments and potential surrender charges compare to a monthly loan payment?
Once you know what you want - and need - out of your vehicle, deciding whether to lease or buy is easier. Then, you can move on to your next decision. Like, do you go for metallic black or classic white...? Or maybe fire engine red is more your style?