Question

You are planning to purchase a new car explain whether it is to your advantage to lease or buy your new car, and why. What did you have to consider about your personal circumstances before making this decision? What are the potential drawbacks of your decision?

Answer 1

Purchasing a new car or leasing a car- this decision depends on various circumstances:

Let us consider the scenario, that I have decided to buy a new car. The advantages of purchasing a new car will be:

1. After loan is repaid, I can sell it or do what ever being on my property. Also if loan scenario nis not there then, new car purchase is actually more saving.

2. When I am not much assure of maintaining a car, it is always beneficial to go for new car purcase.

3. If I am really passionate for driving and would drive a lot, new car purchase is the best decision.

4. When I have special interest of owning a car or it's onw criteria for me as an achievement factor, that psychological factor always ask for a new car purchase.

5. Also for personal usage, new car is always preferable.

Now, personal circumstances like

a. passion for car

b. cashflow available in hand

c. personal or commercial purpose of this car

d. maintenance factor

e. how much average usage or driving will happen etc.

Potential Drawback of new car purchasing decision:

a. downpayment is usually higher in case of new car purchase compared to leasing.

b.My monthly cash outflow will be high.

c.For business purpose, new car purchase is not preferable as interest on loans to purchase a car is not deductible however a % of depreciation and finance cost of leased car is tax deductible.

d. If I want to buy another new or bigger or better brand car in next few years, car leasing is better option.