Buying Versus Leasing a Car
In light of the on-going debate of whether it is better to lease a new car or to purchase it on vehicle finance, we decided to give consumers some facts to take into consideration when they are faced with the option of financing a car through the bank or entering into a car lease agreement.
Even with the low interest rate environment in the South African economy, a lot of consumers are still struggling to service their monthly debt, because of inflation that puts more stress on their already stretched budgets, which can ultimately lead them into trouble with the financial institutions and into the dreaded situation of being blacklisted.
At SA Motor Lease we have seen this need for consumers to be able to drive a new car that is safer and more fuel efficient than older models, without having to commit to the same stringent requirements when financing a car though a bank.
Leasing a Vehicle
Buying a Vehicle on Finance
- The Leasing period is shorter than the finance period.
- There is no balloon payment when you lease a car.
- Monthly rental amounts is fixed for the full period of the contract – meaning that you will not be influenced by interest rate hikes.
- Due to the monthly instalments being fixed, you can budget accurately for your vehicle expense.
- There is no additional cost for fixing the monthly leasing payment.
- When you lease the car it is comprehensively insured against accident, theft, fire and third party claims.
- Monthly insurance cost is included in your lease payment.
- Accident management benefit included in your monthly leasing payment.
- You do not carry the risk of depreciation.
- You can just hand the vehicle back at the end of the leasing period without having the hassles of selling or trading in the vehicle.
- You get 24hour roadside assistance.
- Vehicle finance periods is usually 5 or 6 years.
- Ownership of the vehicle only passes at the end of the contract period.
- Most people trade in their vehicle every 3 years – meaning they never own their vehicles.
- A balloon payment means that you are paying less capital each month and consequently pay more interest.
- If you enter into a variable or linked rate contract then your monthly instalment will increase as the interest rate increases.
- Banks charge a higher interest rate if you want to apply for a fixed interest rate on your contract.
- Banks insist that you have insurance for the duration of the contract period.
- You have to negotiate with insurance companies to get the best monthly premium.
- Your insurance premium is not fixed and is likely to increase every year, especially if you have claimed against your policy.
- All cars depreciate, as the owner you will carry this risk.
- On average after 5 years your car will be worth 35% - 45% of the original retail price.
Why not drive the car of your dreams tomorrow without all the headaches of dealing with vehicle finance? Call us on 011 640 5000 to enquire about our current private car leasing deals and you could drive the car of your dreams before you know it.
Can’t afford the deposit yet? See Pace Car Rental’s long term car rental specials.