Congratulations! You are newly embedded in the ecosystem of young adulthood, which means you are ready for many big steps, including the purchasing or leasing of your first car. You have a myriad of variables to consider when embarking on a purchasing decision of this nature. For one, you will need to get your ducks in a row with your personal finances, before you trudge along with any big purchases. As a purveyor of all kinds of luxury vehicles in the NY and NJ area, Major World has been servicing all types of customers for many years. Keeping you safe and happy behind the wheels of an elegant vehicle is always our goal, and we will continue to treat our customers like family! For today’s topic, we would like to address a frequently asked question that many new buyers will pose– Should I finance or lease my first car?
The Pros Of Leasing
There are benefits to leasing your first car! Think of a lease as something you borrow, but will not own outright, once all the payments have been made. This is the simplest way to break it down in layman’s terms. You are more than welcome to read up on the specifics of leasing here! Until that time comes, here are some of the more obvious benefits for leasing luxury vehicles in the Tri-State area:
- Lower Monthly Payments: Unlike traditional auto financing, you are not paying down the principal balance of a loan. A lease payment will usually include the amount the vehicle is expected to depreciate during the leasing period, along with a monthly sales tax and finance charge. Depreciation is calculated using the annual rate at which the vehicle loses value.
- Low or no down payments: For the same reasons that you can expect to make lower monthly payments, you may be able to secure a new lease with putting very little money down, or nothing at all.
- Affordability: You might be able to afford a higher-priced car, even if your budget is limited. A new-model leased car that includes many upgrades, could be within financial reach, since the costs for committing to a lease are often lower than conventional financing.
- Used-car Leases: Contrary to popular belief, used-car leases are very much a thing. Many consumers are unaware that you can lease a used car if it adheres to certain requirements. Also known as certified pre-owned vehicles, they are usuall y less than 4 years old and are on the lower end of the spectrum for mileage. This option could offer significant savings for you, as the customer.
- Short-Term Leasing Periods: With leasing periods of less than 3 years, you can typically avoid the mechanical issues you might deal with, with older model vehicles. Even if you are facing car issues, they are most likely covered under the manufacturer’s warranty.
- Leasing Perks: Including complimentary car washes and scheduled maintenance, these are a few examples of some of the many perks included in a lease.
- Countless end of lease options: When nearing the end of your lease, you can either purchase the vehicle outright by paying the balance in one lump sum, return it to the dealer, or transition into another lease.
Drawback Of Leasing
We should preface this by saying that we are not intentionally trying to dissuade you from considering a lease. Instead, it’s just to bring you up to speed on the incentives and the potential drawbacks. As we touched on earlier, everyone’s situation is unique, so what works for one, may not suffice for another. With that said, here are some notable drawbacks of leasing luxury vehicles in the NY and NJ area.
- You Do Not Own The Car: A lease is similar to renting a vehicle. The title is in the dealer’s name, not yours. Monthly payments do not contribute towards earned equity.
- Perpetual Leasing Cycles: Leasing cycles could result in never-ending car payments. If you transition into another lease, you may end up paying more for the leased vehicles without ever reaping the benefit of car ownership. The funds could otherwise be used to reach your other financial goals.
- Mileage Limitation: This is one of the most glaring cons of pursuing a lease. Mileage restrictions might be the biggest motivator for keeping people off the road. Meaning, you will have to pay extra attention to how much driving you are doing on a daily basis. Most leases allot for 10,000-12,000 miles per year, with penalties in place for drivers that exceed these limits.
- Costly Venture: Going a few thousand miles over the limit may not sound like a big deal, but the repercussions could prove to be costly for you. Some agreements will charge as much as 50 cents per additional mile. No credit is issued for these additional miles, either. High-mileage leases might allow you more freedom, but be more expensive than a standard lease.
- Surprise Costs: Over-mileage fees aren’t the only added costs that could get you in the end. If the car does not meet the return condition requirements, excessive wear and tear damage fees might apply.
- Early Termination Fees: Ending a lease early means you will incur a larger than normal payment. Some agreements will allow you to cancel the contract early, only if you agree to buy the vehicle.
Pros Of Traditional Auto Financing
Similar to leasing, financing offers a host of benefits for first-time car buyers.
- No Extra Fees Or Charges: You are free from the shackles of mileage restrictions, wear and tear, and modification hindrances that are otherwise associated with leases.
- Fewer Restrictions: You can trade in or sell the vehicle whenever you want. You don’t need to wait until the loan is paid off
- Financing Payments Eventually End: After you make your final payment, you can use that extra money in the budget to achieve other financial goals. The longer you own the car, and after you pay it off, the lower your transportation costs will be.
Cons Of Traditional Auto Financing
Despite the benefit of owning your car when it’s all said and done, you will also own more responsibility along the way. Here is what we mean:
- Higher Payments: Monthly loan payments are typically higher since you are paying down a principal balance and interest.
- Higher Down Payments: You might need to submit a higher down payment up front, when compared to leasing.
- Expiring Warranties: Depending on how long you own the vehicle after the warranty expires, you could also be responsible for major repair costs.
- Owning A Depreciating Asset: Washing your hands of the vehicle at the end of the financing period may take more than you think. It may even fail to net you the money you expect when you sell.
Major World: Luxury Vehicles In The NY and NJ Area
If you are still unsure of whether to finance or lease your first car, our team of professionals at Major World are more than happy to lend a helping hand. To see if financing or leasing is right for you, contact us today or come visit our dealership at your earliest convenience. We offer a host of luxury vehicles in the NY and NJ area!