Buying a Car Versus Leasing - Essay Example

The car that has been selected for this discussion is the 2015 Accord Sedan LX.

Leasing

Type Of Costs

Leasing

Manufacturer’s Suggested Retail Price

$22,105

Lease Payment/Month For 36 Months

$417

Total Lease Payment

$15,012

Residual Value

$10,700

Total Cost To Purchase Leased Car (Total Lease Payment + Residual Value)

$26,712

Table 1: Leasing A 2015 Accord Sedan LX (Automobiles.honda.com 1)

Buying

Type Of Costs

Buying

Manufacturer’s Suggested Retail Price

$23,725

Loan Payment/Month For 36 Months @ 2.9% APR

$711

Total Cost

$25,596

Table 2: Buying A 2015 Accord Sedan LX (Automobiles.honda.com 1)

Discussion

            Whether to buy a car through the method of loan financing or obtaining a car on the basis of a lease is dependent on various reasons. One of the reasons that help in deciding whether to buy or lease a car is dependent on how long an individual wants to use and own the car. If the person wants to own a car for a shorter period and aims at changing the car for a limited period, then the person should opt for obtaining the car on lease. If the person wants to keep the car for a longer period, then the person should obtain it based on a loan. For example, table 1 suggests that if a person wants to keep the car after the lease period is over the total cost of obtaining the car will be $26,712 and this cost will include the residual value as well as the lease payments that a person will make for 3 years for a 2015 Accord Sedan LX. On the other hand, table 2 suggests that if the person obtains the car based on an auto loan, he has to pay a total amount of $25,596 and this amount will include the 2.9% APR that a person pays on the Manufacturer’s suggested retail price. This means that purchasing a 2015 Accord Sedan LX for the long-term based on a loan is less expensive as it costs $1,126 less to obtain a car based on a loan instead of obtaining it on a lease basis. On the other hand, if a person chooses to keep the 2015 Accord Sedan LX for a shorter period of time then he/she should opt for the leasing option because the person will only have to pay $15,012 to enjoy the car for 3 years and then he/she can switch to another car. In my opinion, I would obtain a 2015 Accord Sedan LX on the basis of a lease as I believe that owning a car for a shorter period of time is better than owning it for a longer period of time. Since I want to keep the car for a shorter time period, I would prefer to pay only $15,012 and this will keep my cost of owning a car to the minimum.