One important decision when getting a new car is deciding whether to buy or lease it. There are benefits to each, so educating yourself is important before making a final decision.
We’ll discuss the differences in leasing vs. financing a vehicle and which one is a better option, including a focus on the insurance information for leasing a vehicle.
Auto Insurance for a New Car
A question you might have is what does leasing a car mean, especially when it comes to auto insurance. Leasing a car means you are using a car for a certain amount of time and a certain amount of miles.
One important thing to note is that you must have full coverage insurance when leasing a car. If you have an auto accident, you will be responsible for filing a claim and fixing the vehicle. This is why full coverage insurance is important.
Your insurance premium is not included in the monthly lease cost, so this is something you need to consider when determining your budget. Many factors affect your insurance rates, including age, where you live, and your profession.
Your insurance rates may also be more expensive or you may have to raise your liability limits when leasing a car, so make sure to compare quotes online or ask an agent about the best rates.
Benefits of Leasing a New Car
When you lease a car, you are basically renting a car. You must follow the terms and conditions of the lease explicitly. You agree to pay a certain amount monthly and you must keep the mileage below a certain amount by the end of the lease term.
The mileage allowance is usually around 10,000 to 15,000 per year. You have to pay for the extra mileage, which can be quite expensive (15 to 25 cents per mile). Most leasing agreements are around the average miles driven in the United States – 13,500 miles. But if you travel a lot and exceed your agreement, you will have steep bills.
During the lease, you are making payments on the depreciation, taxes, and additional fees on the car. Monthly lease payments may be cheaper than a monthly car loan payment for the same car.
You may or may not have to pay for any car maintenance or services like oil changes, depending on the lease agreement. Repairs are usually covered by a warranty, so that is another benefit.
One of the major advantages of leasing a new car is that you are not tied to a certain car for a long period of time. Some leases might only last 24 to 36 months.
The down payment for leasing a new car is also usually less than the recommended amount for a down payment when you buy a new car. With a lease, you may be able to afford a nicer car with your budgeted monthly payment than if you were to finance the same car after you prove your income.
If you get bored with cars quickly, don’t drive a lot of miles, only need a car for a few years, or don’t like being tied down to a car long-term, a lease might work for you.
Benefits of Buying or Financing a New Car
There are a number of reasons why someone would choose to buy or finance a new car.
First, there are no mileage limits when you buy or finance a new car. You can put as many miles on the car as you want, which is important for those who have a long commute or use their car for long trips.
You also don’t have to pay for excessive wear and tear, which can occur when leasing a car. You can also modify a car when you are financing it, and you can’t typically do that with a leased car.
One of the major benefits of buying or financing a new car is that you should eventually be able to completely pay off the auto loan. You may have higher monthly payments, but eventually you will own the car yourself. This also means you could have a period of time when you have no regular monthly payments.
If you like the idea of owning a car, want some time with no monthly car payment, drive a lot of miles, or like to keep a car long-term, then buying a car might be for you.
When it comes to leasing vs. buying a car, it is important to understand all the details so you can make an informed decision. You should always drive carefully to avoid car accidents.
There are benefits and drawbacks to either option, so make sure you consider your budget, driving preferences, and auto insurance before you decide.
Melissa Morris writes and researches for the auto insurance comparison site, AutoInsurance.org. She is a college professor and enjoys writing about saving money and budgeting in all areas of life.