Buying A New Car Or Considering A Leasing Option

These days there are many tools which are available online to help you in making decision regarding buying a new car or considering a leasing option. Online financial calculators are available, and by using them you can easily figure out the cost of leasing and monthly installments etc. However, these calculators neglect the major cost like registration fees, car insurance, or any taxes levied by the Government on upfront payments. Some of the calculators can calculate these costs for you; however, residual value of the car at end of leasing period considerably varies company to company.

In year 2007, about 27% of the cars were acquired on lease by the people according to a marketing research. However, you must take into account the fact that at the end of lease period, the buyer of the car will be owning the car, while lessor will have to return the car, and go for leasing some other car.


Real Facts

If we analyze the option of best selling Japanese Car Honda Accord having price of US$ 24,500 it results in savings of $4,600 over a lease term of five years than the closed end leasing option for same model of the car.

We have tried to evaluate, a set of most common leasing options opted by the users i.e. three year leasing and financing option for five years, and estimate the overall expenditure for every year, for five year period. Particularly, we have taken Japnese Car manufacturer's online campaign for lease options of 36 monthly payments of $240 and compared it against conventional five year term loan having interest rate of 7%. To compare the offer, we opted another model of Lexus having price of $38,400 which can easily be taken on lease by paying $ 429 per month.

If we look at cost of lease being paid on monthly basis, it looks like leasing is a better option for above mentioned cars.

However, you must take care of end of year costs of leasing option, for instance charges for extra mileage etc. Analysts believe that assessment for wear and tear of the vehicle averaged about $ 1800 during year 2007, which causes dissatisfaction for the people considering leasing option. Insurance cost of a leased car might be expensive as well, so it has been proved that financing is a better option opted by users these days since Federal Reserve has cut the interest rates upto 2% making the financing more affordable for the people.

By: Faisal Jaffery

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Faisal Abbas is the CEO and co founder of Used Cars For Sale Pakistan which is one of the top market place for sale and purchase of automobiles in Pakistan.