Short of a house, a car’s probably the most expensive thing you’ll ever put money towards. That’s why it’s important to know what your options are before deciding whether you should be buying or leasing a car . It’s easy to get caught up in the gleam of a new ride, but you have to think about what you can afford.
So should you lease or buy? Before you can commit to either, it’s important to really know the difference.
Leasing versus buying
When you buy a car, you either pay for the vehicle outright or you take out a car or personal loan  to finance it. The end result is the same: once your car is paid for, you become the owner.
However, when you lease a car, the organisation that grants the lease remains the owner of the vehicle, despite your regular payments. You only pay for the use of the vehicle for a certain period of time, so you’re technically renting. Depending on the lease, you may also be tied to a set mileage.
Things to consider before making a decision
When deciding whether to lease or buy a car, you should always consider:
- Initial, continuing and final costs,
- Purpose and type of vehicle,
- Modification needs,
- Tax deductions.
If you buy, the initial cost will be a bigger investment. It can either be the entire purchase price or a deposit. You’ll also need to pay for registration, government stamp duty, number plates, insurance, and any optional extras.
When you’re leasing, this initial cost is less of hassle, as it only involves a security deposit and a first lease payment. At the end of the lease, this deposit is refunded.
The continuing costs are similar with both options. There are monthly payments (although the lease payments may be considerably lower than the loan payments due to the interest payable on a loan), maintenance, servicing, fuel, repairs, and roadside assistance.
However, it’s the final costs where leasing seems like the less attractive choice. At the end of a lease, you’ll have to pay fees for excess mileage and wear and tear, and if you want to keep the car there is still a lump sum payment to purchase the vehicle.
Pros and cons
The biggest advantage to buying a car is ownership. It can also count as a capital item for taxation purposes, and you can make modifications to your vehicle. A disadvantage is that your vehicle immediately starts to decrease in value after you’ve purchased it and it requires a larger upfront cost.
Leasing has several pros. It doesn’t require a major upfront investment, you can put it through a business and you get a new vehicle every few years. However, the major disadvantage is that you don’t own the car, which will cost you more in the long run. You also can’t claim the car as an asset for other financial purposes.
In order to sort out your car finance , it’s good to know your options and to make an educated decision on what best suits your financial circumstances and needs. Contact Beyond Bank  today to find out more about our car finance offering.
This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular circumstances and needs. Financial planning services are provided by Eastwoods Wealth Management Pty Ltd ABN 17 008 167 002 / AFSL 237853 trading as Beyond Bank Australia Wealth Management. Eastwoods Wealth Management Pty Ltd is a subsidiary of Community CPS Australia Ltd ABN 15 087 651 143 / AFSL 237 856 trading as Beyond Bank Australia.