Buying vs Leasing a Car - Essay Example

However, it is worth noting that leasing does not make one own a vehicle. Notably, at the end of the leasing period, the person who pursues the leasing option will have to begin a new lease or buy cycle. On the other hand, a person who buys a new car will own the vehicle after completing paying all the dues. In the long run, a person who leases the car pays more than one who pursues the purchasing option.

The loan and lease terms differ markedly. Buying a vehicle implies that the buyers will have the responsibility of paying the entire cost of the vehicle without considering the number of miles covered. Typically, the lender determines the total cost of the vehicle which includes sales tax, down payment, and interest rate. A loan needs an individual to invest a down payment in the vehicle. The borrower will have to decide the amount of savings to cater for the down payments. The more the loanees put down, the less they will require borrowing from the bank (Reed). The loan then funds the remaining amount. The borrower will have to pledge other assets for collateral. In addition, the loanee will have to bear all the risks including vehicle devaluation, especially with the increasing pace of technological advancements. Fundamentally, loan size, loan term, amount of down payment, and interest rate determine the monthly payment on the auto loan.

The terms of renting differ from that of the loan. Leasing implies that the individual pays a portion of the cost of the vehicle. The portion paid is the part the individual uses during the driving period.  The charges of sales tax reflect in the monthly charges (Avdul and Steve, 73). In addition, a person can opt to pay a down payment under leasing. Hence, the payment of the down payment is not mandatory in the leasing option. Money factor that is similar to the rate on the loan is paid. The leased vehicle is only the requirement for securing a leasing transaction. In addition, the lessors bear the risk of obsolescence because an obligation to own the vehicle does not exist after the end of the lease. However, the pursuers of the lease may pay a lease-related fee, as well as, a security deposit.

I would rather buy a car than lease one. Purchasing a car presents notable benefits. Buying implies that I will own a car after paying off the loan. In essence, I will gain equity in the car as I continue paying the loan. The leasing option does not offer a chance to build equity for the car since an individual rents the vehicle for a specified time. The end of the lease indicates that a person will have to secure a new car with new terms of payment (Avdul and Steve, 74). In addition, buying a car does not have mileage restrictions as is the case in leasing. The lease contracts tend to limit the number of miles one can drive. In effect, a person who pursues renting needs to have a rough estimation of the number of miles to drive in a year. Exceeding the required number of miles implies that an extra fee will be paid at the end of the lease. However, buying a vehicle does not have a capping on the miles. Hence, I will enjoy the driving experience without any interruption.