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There are a lot of factors to consider when getting  a new car. Since everything is going up nowadays, one important factor to consider is your budget. 

As we all know, cars are expensive. It can be difficult to afford a new one even with long term auto loans. Fortunately there are other options to get behind the wheel of a new vehicle and car leasing is one option. 

Car leasing helps consumers to get a new vehicle with a low monthly payment compared to buying a new one. 

One of the biggest decisions you'll have to think of though is whether to buy or lease. There are several pros and cons to consider depending on your needs and preferences. 

Read on to know the benefits of leasing vs. buying a vehicle to help you decide.  

What is Leasing?

Leasing a car is simple. It's like renting a car for a lengthened period. You won't be paying for the full amount like you would do if you would be buying a car. Instead, the dealer will draw up a monthly car payment plan based on your credit score and the car's value. 

Most of the time, a down payment must be made and the remainder of the lease cost is split into equal monthly payments with interest. Lease terms usually last from 36 to 48 months, though some last up to 60 months. 

There are two lease types that you can choose from:

Closed-end Lease - You will return the car at the end of your lease and pay for all extra expenses like additional mileage fees, repair costs and fees for excessive wear and tear. You can also buy the car after the lease. 

Open-end Lease - You will have to purchase the car once the lease runs out for an agreed-upon sum or pay the difference between the car's market and depreciated value.  

What Do You Pay for With a Car Lease?

The cost of the lease is the capitalized cost (negotiated price of the car) minus the residual value (estimated value of a fixed asset at the end of its lease term), plus interest (the money factor) and several fees. You’ll also have to pay registration fees. 

For example, let's say you’ve got your eyes on a BMW SUV Crossover. It has a capitalized cost of $60,000 and a residual value after three years of $40,000. To lease the SUV, you'll have to pay the difference ($20,000) plus interest and fees. 

Let's say they asked for $4,000 plus fees upfront, the remaining $16,000, plus interest, is split into a series of equal monthly payments. Then you have to return the vehicle to the dealership after the lease term.   

What Is Car Buying and Financing? 

Car buying is still the most favored way to get behind the wheel of a new vehicle. You negotiate a price for a car or vehicle that you like. Then most people take out a car loan to pay that price, minus the price of your down payment. 

If the vehicle costs $43,000 (no down payment) then you’ll pay the full $43,000, plus the cost of interest on your car loan if you have one.  

With car financing, the lender holds the title to the vehicle until you pay off the loan. You will then get the title and own the car after. 

What Are the Benefits of Leasing a Car?

Lower Monthly Payments

Your monthly payments are generally lower with a lease than a purchase. You'll only be paying for the depreciation that is expected during your time with the car rather than the full price of the vehicle. 

And since the monthly cost of the lease is more affordable, you may be able to get a high end model or nicer vehicle with the same monthly payments as you would have with buying one. 

Latest Technology

There are so many additional car features available today that's why car prices are also getting higher.  

When you lease vehicles every few years, you'll always get access to the latest technology.   That includes features such as parking sensors, automatic emergency braking, adaptive cruise control, and blind spot monitoring. Newer car models' fuel economy will save you money at the gas pump. 

If you buy a car on a budget, you might not be able to afford one with the new features. 

Warranty Coverage and Maintenance

As long as your car lease and the contract’s mileage limit are within the agreed terms then you will be covered by the vehicle's factory warranty for the entire duration of the lease. 

You wouldn't have to worry about paying for warranty covered repairs since the dealer would take care of the cost. Unless you damage the vehicle, which will be your responsibility. 

Trading-In Is Simple

Selling or Trading In a used car can be a hassle to owners. This is something that you wouldn't have to think of or deal with when you get a lease. 

You can just return the car to the dealership where you got it at the end of a vehicle lease. There will likely need to pay a few fees especially if you went over the allowed mileage limit or if you damaged the vehicle. 

You May Save Some Sales Tax

Tax policies vary by location. And leasing a car can help you save in sales tax. 

For some places, you only have to pay sales tax on the amount of your down payment plus the total of all of the contract’s monthly payments.

If you purchase a car, you're generally liable for sales tax on the entire purchase price. In some places, you pay for the sales tax on the entire purchase price of the vehicle, minus the value of any trade-in.

Potentially Smaller Down Payment

Most of the time, leases come with smaller down payments than new car purchases. Some contracts even come with nothing due at signing. 

The monthly payments may be higher, but some leasing advocates encourage consumers to negotiate leases with the smallest down payment possible.

With a smaller down payment, you'll have less to lose if ever something bad happens to the vehicle.