Leasing vs. buying – which is better?

Posted on Friday, April 24, 2015 - 10:16

It’s an age-old debate – whether leasing or buying a car is the better option. Both have their merits. What are the advantages to leasing? Leasing has become a popular option with Australians in recent years, especially as we experience advances in automotive technology almost every day. But which is definitively better? 

Upfront costs

Leases usually have lower upfront costs than a car bought by a loan. You may have to come up with a sizeable deposit or trade-in before buying a car with a car loan. Many leases do not have this requirement.

WINNER: Leasing

Ongoing costs

Even at the most competitive car loan rates, car leases always edge out monthly (or regular) repayments. That’s because you are only paying for the time you’re using the car, not the entire car. That means the residual value is kept at the end of the lease (like a balloon payment.) You won’t have to pay that balloon payment if you start a new lease or trade your lease car in for a new car.

WINNER: Leasing

Maintenance costs

Lease cars have assured maintenance over the lease period. As time goes on, you will have to shoulder the burden of keeping your car maintained with services and other patch jobs. The longer your car is on the road, the more it will cost to maintain.

WINNER: Leasing

Equity vs. depreciation

It’s true – driving your car off the lot brings the resale price down 20% instantly. Since you don’t own a lease car, you won’t ever have to worry about depreciation and offloading an ageing car when you want to upgrade at some point. However, the downside is that you’ll never have equity in the vehicle if you lease. This may not sit well with some.

WINNER: Tie

Having the latest models

The latest cars have the latest in technology. That means advances in safety, electronics and fuel economy are at the cutting edge. Imagine getting a car that always had the best that automotive design and engineering could come up with. That’s what happens with car leases – at the end of every lease term, you have an option to trade in your current car for a new car with a new lease.

WINNER: Leasing

Business owners

Businesses taking on assets can sometimes mean they’re taking on a liability. Businesses that lease cars can claim the interest payments on their BAS, and in some cases the depreciation. Financiers may also claim the GST paid on the vehicle which means that saving is passed on to the business owner (and individual consumer!)

WINNER: Leasing

Rate this Blog: 
Average: 4.8 (5 votes)