One of the big questions to answer when it comes to securing a new vehicle is whether to lease or buy. Either way, you’re probably looking into your credit history—because you know your creditors will! Today we answer the question: “Is leasing or buying a car better for my credit score?”
The answer is, of course, that it depends. If you’re just starting out, purchasing a new Jetta or Passat can be a good way to begin establishing your credit. If you have other outstanding debts, a lease plan may free up more cash to pay down older debts. Let’s examine the options in more depth.
Establishing (good) credit history
The most important thing is to make your payments in full and on time. This will begin to establish a positive credit history and help you budget your funds.
What is a car lease?
An auto lease allows you to pay for the depreciation of the vehicle during the agreed upon length of the lease. At the end of your lease, you don’t own the vehicle, but you may have the option to purchase it at that time.
Have I increased my assets?
Adding an asset to your net worth requires ownership. Therefore, leasing a vehicle, since ownership of the car doesn’t pass to you, doesn’t result in the car being an added asset to your net worth. Purchasing a car with a loan does pass ownership to you, but your payments and interest rate may be higher.
What about other monthly costs?
When you own your car, you have to take into consideration other monthly costs of vehicle ownership, like gas, insurance and maintenance. Standard maintenance and repairs may be covered under a lease agreement, which means less cash flowing out of your wallet and more money to apply to other debts.
Still not sure what the best move for you is? We offer on-site financing at J. Bertolet for your convenience. Our customer service reps can help you find the best payment plan for your needs and your wants.