Leasing vs. Buying a Car, Research Paper Example

Problem Background

Making purchases on vehicles has many advantages. One, the buyers can modify the car in whichever way they choose it to be. This modification includes the paint that the vehicle is painted and all the addition of all aftermarket appliances that the person wants to be added. Most people prefer buying cars compared to leasing them. These people argue that it is economical for them to buy their cars than to lease other people’s cars. According to these people, buying cars would cost them less money for the vehicle. On the contrary, it would cost them more if they spent money on loans if they lease more vehicles in a given period, like months or years.

The buying of cars also has disadvantages attached to it besides having several advantages. For instance, if the car’s warranty gets expired and then the person experiences mechanical hitches while driving the vehicle, the person gets responsible for all the costs required for repairing the car. Also, as the vehicle gets more aging, the person intends to spend on incurring more repairing and cost of maintaining the car. The person is also responsible for all the activities that are involved when selling the car towards the final part of the loan period. Therefore, as many people advocate for buying cars over leasing them, the advantages and disadvantages vary when weighing up the two.

Problem Statement

The issue of buying cars versus leasing them is critical as far as the economic aspect is concerned. Both the two; buying and leasing, have their advantages. Also, the two have several disadvantages. However, buying cars is given an upper hand compared to leasing. The upper hand is given to buying because people want to normalize spending once when making purchases of their choice of cars. They do not intend to lease where they will be required to be paying substantial loan amounts annually after a given period of years based on the memorandum of understanding between the leaser and the leasing person. This paper seeks to address all the rights and wrongs involved in buying and leasing cars.

Objectives

This paper focuses on the business of cars. There are two variables in this business. They include buying cars and leasing cars. The paper will therefore look into the factors people put into consideration when buying cars. It will also focus on the dimensions and circumstances that push people to lease cars instead of buying. This paper will seek the views of all the recent car buyers. It will also seek to interview and get views of those who lease cars. Car business owners will also have a critical analysis as to either sell their cars or lease them. They will consider both advantages and disadvantages of both selling cars and leasing them about profit-making. Therefore, at the end of this research paper, car buyers and leasers will have a good assessment on which aspect to choose between buying a car and leasing one.

Decision Alternatives

Buying of Cars

While buying or leasing cars is critical to many people, some people prefer buying cars over leasing. The advantages of buying cars are several. With the buying of a vehicle, the person becomes an eventual owner of the car (Nationwide, 2020). There is a feeling of pride when becoming in full possession of a car because it is considered a big asset by many people. Therefore, car buyers feel great when they have cars registered under their names.

Also, buying cars means the owner having no limits of mileage (Nationwide, 2020). When individuals buy cars, they tend to control how the cars should be utilized. They are not limited to either going for long distances or going for long hours using the cars. They are also not limited to which cargo to carry using the car and which not to carry. Car owners also can sell their cars anytime they feel like doing so, depending on their needs.  They also enjoy the freedom on how to customize their vehicles. Therefore, the buying of cars comes with full ownership of the cars and the freedom to control one’s car.

The idea of buying cars comes along with the privilege of having lower costs of insurance (Nationwide, 2020). The insurance costs vary depending on the type of cars, the utilization type of cars, and the risks involved while using the cars. Therefore, individuals’ owning of personal cars gives them an added advantage to spending fewer funds when paying insurance costs. The lower costs are better compared to the insurance costs that accompany the leasing of cars.

On the contrary, the buying of cars has its disadvantages. They include the depreciation of these cars with time, having unpredictable values of reselling the cars, having maintenance expenses after their car warranty is over, having higher monthly loan repayments for their cars (Nationwide, 2020). The cars depreciate their value with time. If the car owners are not financially stable, it would be costly for them to maintain their respective cars. Therefore, as much as car ownership has several advantages, it also has its demerits.

Leasing of Cars

The business of leasing cars involves renting cars for a given period (Vincent, 2020). It involves clients paying depreciation amounts together with interests for the intended lease period. In leasing, the business owners tend to make more profits derived from the charge fees and the interests paid. The profits are more compared to the direct sale of cars. In the leasing business, there’s the concept of capitalized cost. This cap cost is the cost that the car lease clients negotiate for them to be able to lease the cars. In some instances, this cost is always fixed (Vincent, 2020). Also, there’s the concept of residual value. This value is the opinion by the experts on the value they expect the vehicle to be towards the end of the period of leasing. The lease companies also involve the concept of money factor in their businesses. This concept represents the interest amount that the clients include in each of the subsequent monthly payments.

The leasing of cars has several advantages. These include the cars having warranty coverages always, the amount of money is saved from sales tax, chances of having down low payments, and the clients having a chance to interact with the latest models of cars within a short period (Vincent, 2020). Also, with the business of leasing, the trade is normally simple compared to the business of selling cars. Therefore, the business of leasing cars is a profit-making business compared to the selling of cars.

Data Collection

This research study will involve the car dealers in the U.S. Information on both car selling, and leasing is o0btained from them. The methods of data collection involved in this research study include interviews, questionnaires, and observations. However, due to the existence of the novel coronavirus disease that prohibits the interaction of people, data collection will be achieved through an online set of surveys and questionnaires. The information will then be used to assess what is more economical and better between selling cars and leasing them out.

Data Presentation

The most purchased type of vehicle in the U.S. in 2018 is the Tesla model. It is followed by Toyota Camry, Honda Accord, Honda Civic, and Toyota Corolla, respectively. The picture below represents a graph of the sales of cars made in August.

Source (Grinshpun, 2018)

Conclusion

Based on the data collected, business investors and car purchasers will use this research paper to assess better between leasing cars and buying or selling them. The choices made by many of them will be critical because both the two have advantages and demerits. Therefore, leasing and purchase of cars are dependent on the past wave concerning the business.

References

Grinshpun, M. (2018, September 9). Tesla Model 3 = #1 Best Selling Car In The U.S. (In Revenue). Retrieved from Clean Technica: https://cleantechnica.com/2018/09/09/tesla-model-3-becomes-1-best-selling-car-in-the-us/

Nationwide. (2020, February 28). Should You Lease or Buy a Car? Retrieved from https://blog.nationwide.com/should-i-buy-or-lease-a-car/

Vincent, J. M. (2020, February 6). Buying vs. Leasing a Car. Retrieved from U.S.News: https://cars.usnews.com/cars-trucks/buying-vs-leasing