Getting a car is an exciting prospect but you may not be sure whether to lease a car or buy it. The explanations below on what the differences are between a car lease and buying should assist you in swaying either to the vehicle leasing side or purchase side depending on your preferences.

Consider that you have taken out a bank loan to purchase a car and have a monthly repayment plan in place which includes interest on the loan. As your monthly payments progress, the amount you owe the bank becomes progressively smaller, and in turn the interest you pay becomes less because the amount you’re paying interest on is reducing. As an example, you get a 10,000 loan and buy the car, and after a certain number of months you have managed to repay the bank 3,000 plus interest. Now you are not paying interest on 10,000 but instead on 7,000.

When it comes to lease cars however, the payments you make are for the use of the car as opposed to buying the car. This use includes the car’s depreciation cost (i.e. the value it will lose whilst in your use), mileage that goes over your lease agreement mileage, as well as excessive wear and tear that occurs during your use of the car. You will also pay interest charges during car leasing. A vehicle leasing company will buy a car and then lease it to you, so when you decide to lease a car, the interest you are paying as part of your lease payments is interest on the purchase price (for example 10,000). Note though that because you are paying to use the vehicle during car leasing instead of making purchase loan repayments, the 10,000 amount that you are paying interest on never gets smaller, hence the interest you pay will not reduce like it would if you had bought the car.

One of the main benefits of a car lease is that once your lease agreement is finished, you return the vehicle to the car leasing company and it is their responsibility to sell it. The monthly lease payments are more often than not going to be more overall during the lease period than purchase loan repayments would be, but every couple of years you have the option to get a new car when your lease expires. The maintenance costs on a leased car are likely going to be quite low because when you receive it the car is new and the lease period will only be a few years.

Almost inevitably if you are going to sell a car that you bought a few years previously, you will make a loss on the sale compared to what you paid for the car because it will have depreciated in value during the time you owned it. You will also probably have higher maintenance costs the older your car becomes. One of the benefits of a purchased car over a lease car however is that you can modify it since you own it but you are not allowed to make modifications on a lease car.

Understand the contrasts between buying a car and vehicle leasing before making a decision. Go to Leasing Options for good deals on your lease cars