Buying a car
It is purchasing a car by paying the entire amount at once or on finance. The car is yours you can do whatever you like to do with it. It is more expensive than taking a car on lease. The car can be sold and the amount can be utilized in the next car or for other purposes.
Benefits of buying a car
- The car can be modified without considering a contract
- The car can be used as much as you need, as no mileage limits
- The car can be sold as per the owner’s desire
- The car is only yours
Drawbacks of buying a car
- More expensive in the short term
- More sales tax
- There can be no profit while selling a car because of depreciation
- After the car warranty expires you have to pay for maintenance
Leasing a car
Leasing a car is getting a car on rent for quite a while, paying a few portions each month as long as you keep it. At the point when the lease is over, you need to bring it back. The lease amount is calculated on the value of the car at the time of the lease, the estimated value of the car at the end of the lease, mileage allowance and length of the lease. Generally, two types of lease are here open-end and closed-end.
Open-end vs. closed-end leases
Closed-end means you agreed about the future measure of car and you are prepared to pay it, regardless of if the amount at that time is lower than decided earlier.
In open-end future value is not mentioned possibly expected value is mentioned if the amount is less you will get money if it is more than you have to pay.
There are different types of lease fees that you may have to pay.
It is the fees that the company costs for arranging a lease.
It is an initial payment in the lease, roughly equal to the one-month lease payment.
Early termination fee:
This fee is charged when you want to terminate the lease before time.
It covers costs for cleaning and selling the car at the end of the lease.
Benefits of car leasing
- No interest charge on payments like in PPC (personal contract purchase).
- Down payments are generally low
- Most of the repairs are covered in the warranty
- You can have a new car every year
- The lease agreement can be structured according to you; there is no fixed time you can choose your time period
Drawbacks of car leasing
- The lease amount can be high than the actual amount of car.
- No ownership at the end of the car lease, you can buy that car if the dealer allows.
- Penalty amount can be high.
- Miles are fixed if you exceed the limit you have to pay charges. Generally, it is 15-50 cents per mile.
- You have to return the car in the exact condition as you took it from the dealer.
How to lease a car
- Choose your car.
- Take a test drive and get some information about the security.
- Check other deals and compare them.
- Ask about the agreement and carefully read it.
- Check all things are in the agreement including the future estimation of the car.
- Pick the date according to your comfort as you have to pay a penalty if payment gets late.
Documents for buying or leasing a car
- Valid driving licence
- Residence proof
- Income proof
- Payment i.e. cash or cheque
- Insurance card
- Credit report
- Trade documents (title, registration, or loan release)
- Two recent pay slips
- Co-signer in case you don’t have a credit history