A major decisions that many individuals and businesses make is whether to go for car leasing or whether to purchase a car. Both contract hiring and buying have their advantages and disadvantages. Therefore, depending on your particular situation, the below factors will help you in making your decision.
Advantages of Car Leasing Over Buying
The following are advantages of car leasing over buying.
Pay Only for Period Depreciation
When contract hiring, you only get to pay the effective depreciation of the car as opposed to the total depreciation as is the case with buying. For example, if a cars market value is $50000 and it will be valued at $30000 in two years, your monthly repayments if you choose to lease the car for two years will be the difference in value which is $20000. This means that you get to pay much less if you lease as compared to purchasing the car.
You Have Option of Buying
Another major advantage of leasing over buying a car is that after the car leasing period, you choose whether you want to buy the car or look for another lease car. This means that based on the options available then, you can postpone your buying decision to a later date. When you choose to buy the car, you can negotiate for a good buying rate since the dealer gives first priority to the person leasing the car.
Damages and Repairs are Partially or Totally Covered
In most contract hire contracts, the costs of repairing and maintaining the car is bore by the leasing company. This means that you get to save a lot in terms of maintenance cost. Some car leasing contract will have an arrangement of sharing the costs of repairs and maintenance. The dealer will however insist that you take a comprehensive insurance for the car and this may be an extra charge.
Credit Report
It is easy to get financing for car leasing since the risks to the lending company are low. Therefore, if your credit is bad and you find it hard to secure financing to purchase your car, you can consider car leasing as a viable option.
Disadvantages of Car Leasing Over Buying
There are several disadvantages of leasing a car as compared to purchasing the car.
Heavy Charges on Contract Cancellation
If for any reason you choose or are forced to cancel the contract hiring contract before the contract term is due, you will pay much in terms of penalty charges and fees. The company seeks to protect itself from loss risks and therefore, the penalty charges of breaking the lease before its term are more punitive. You may need to break the term for may reasons. You may need to travel or you may be without a job. You may also loose your license from a traffic offense and thereby not use the car.
Heavy Charges on Extra Mileage
The car leasing contract stipulates the maximum mileage that you can cover under the contract. It then places very high charges for every mile exceeded beyond the contract limit. This charges limit your use on the car since you are conscious not to go beyond the agreed mileage.
Insurance Usually Higher on Leased Cars
Insurance on contract hiring cars is usually more expensive than owner insurance since the insurer knows that you have no equity on the car and therefore, you may not maintain the car with the necessary care. This high insurance premium are added costs to your car leasing.
Your Payments Do Not Go Towards Equity
Unlike in purchasing a car, car leasing payments do not go towards your car equity. As soon as the contract is over, the car reverts to the dealer or lessor. You can therefore not use the car as collateral for a loan and your payments do not help in acquiring the car.
About this Author
UK Leasing and Contract Hire Company is a leading UK firm that provides the best deals in car leasing. You may follow this link to get further information and to access our latest offers on contract hiring.
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