[Partner Content: ING Luxembourg]
If you want to treat yourself to a new car this year, you most probably will face the following question: should I buy or lease? To help you with your decision, ING Luxembourg has compiled a list summarizing the most important aspects of both.
When you buy a car, you obviously own it and you get to keep it as long as you want. When you lease, you are free to use the car but must return it at the end of the leasing period. However, you often get the option to buy it from the leasing company.
Purchasing a vehicle involves paying the cash price or a down payment, taxes, registration and other fees. To lease a car, you typically have to make a down payment, as well as pay a refundable security deposit, taxes and other charges.
If you decide to take out a loan to buy a car, you usually end up paying more than if you’re leasing. That’s because if you’re buying, you’re paying off the entire purchase price of the vehicle, plus interest, taxes and fees. Lease payments are almost always lower than loan payments because you’re only paying for the car’s depreciation over the lease term, plus rent charges, taxes and fees. Of course at the end of the car loan, you actually own the car, which is not the case with leasing.
You’re free to drive as much as you want in your own car; just note that the higher the mileage, the lower the re-sale value. Most leasing contracts put a limit on how many kilometres you may drive, often between 15,000 and 20,000 kilometres a year. If you exceed the indicated limit you have to pay extra.
If you own a car, you can basically change, customise and tune it in whatever way you like (it still has to pass the “controle technique”, the SNCT technical inspection, though). A leasing company, on the other hand, wants the vehicle returned in a sellable condition, so you have to remove any custom parts or reverse any modifications before you return the car. If there’s any residual damage, you have to pay for the repairs.
Your own car will depreciate over time but its cash value is and will always be yours. Leasing offers the advantage that depreciation doesn’t affect you financially. On the negative side, you don’t have any equity in the vehicle.
If you own your car, you can sell or trade it at any time you want. If necessary, the money from the loan can be used to pay off the remaining loan balance. However, if you end your least early, the charges can be almost as costly as sticking with the contract.
We hope this overview has given you an idea of the advantages and disadvantages of both buying and leasing. Whatever you decide to do, enjoy your new car and drive safely!