Pride of ownership is one of the main reasons why many purchase a vehicle, as is the thought of having an asset, depreciating though it may be, at the end of that financial exercise. However, leasing – or a subscription plan – could be a better alternative to buying – via hire purchase – if you plan to use a vehicle for less than five years, says an academic.
According to Universiti Teknologi Mara (UTM) department of economics and finance studies senior lecturer Zetty Zahureen Mohd Yusoff, this is because users can save a lot in upfront costs and monthly payments over the duration. She added that individuals who plan to switch to a new car every few years should consider leasing as it offers flexibility.
“Owning a car means having an asset at the end of the hire purchase agreement. However, if you plan to switch to a new car every few years, then leasing will offer flexibility, as it allows people to drive a new car every few years. Buying means they must commit to a single car for a longer period, but allows for ownership pride once it is paid off,” she told The Sun in an interview.
She added that leasing a vehicle also reduces the financial burden on those who cannot afford the maintenance costs, as leasing does away with servicing costs unlike owning a vehicle, where vehicle owners usually bear all the maintenance costs.
Additionally, one would only be paying for the vehicle’s depreciation during the lease term, not its full value when compared with signing a nine-year purchase agreement, she said. adding that lease agreements are protected from the vehicle’s depreciation because the lessee will return it at the end of the term.
She pointed out that there are some restrictions to leasing, such as the inability to modify or personalise the vehicle as a lessee wishes (as well as a mileage cap, in many cases), and said several things must be considered before deciding on which path is the most suitable.
She said before deciding between leasing or buying a vehicle, individuals must assess if their decision is based on a long or short-term basis. “The decision to buy or lease a car should align with the financial situation, lifestyle and long-term automotive requirements of the lease.” she said.
Most Malaysians go the hire purchase path when it comes to vehicle ownership, but have you ever considered leasing, or would you? Share your thoughts with us in the comments section.
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