BLOG POST #5
RESEARCH
The economic principal I am studying is “because of scarcity people choose, all choices have an opportunity cost”.
Edmunds, a highly regarded automotive website and online magazine, explains the real life scenario of choosing options when there is a scarcity. According to the article, the top two choices that people have to decide between when paying for cars is leasing or buying. Leasing allows consumers to “drive a more expensive car for less money” and after your lease term you can upgrade your car to have the “latest technology every few years”. Buying a car upfront allows consumers the option to sell the car when they feel necessary and having the availability to “modify the car to your tastes”.
Because of scarcity, you only have one option to decide upon. While leaving the other behind as your opportunity cost. Leasing a car requires monthly payments for the term you have the car which is usually between 2-4 years. This can be beneficial for people who can’t afford to pay the full price upright. A benefit of leasing is that most problems the car would acquire would be under warranty, and that there are no “trade-in hassles at the end of the lease”. A downside to leasing is that you are limited to a certain amount of miles to drive on the car. So consumers need to be conscious of the driving that they will be doing if they decide to lease. When buying a car upfront you get the benefit of owning the car and not having to worry about going over miles. As well as the freedom of upgrades and not being stuck in a contract. The largest benefit of buying would be that in the long-run it is much cheaper than leasing once you have paid off the car. Because you don't have to continue paying monthly payments that on average are around a couple of hundred dollars. It is necessary to weigh out your financial options and driving style to choose between a way of buying your car.
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