Car Buying vs Leasing: Pros and Cons
If you’re in the market for your next vehicle, one of the first decisions you’ll need to make is whether you buy a new car or lease it. Although leasing used to be predominantly chosen by those getting a car for business purposes, it has steadily grown in popularity, especially among car shoppers who prefer driving newer cars.
There are excellent deals available with both buying and leasing, which means it depends on which option is right for you and your needs in a car. Learn more about the advantages and potential concerns with each below and you’ll be able to make an informed decision.
Pros: Advantages of Leasing a Car
When you lease a car, you make a monthly payment on it just like you would if you were paying off a car loan. One key difference is that with a car loan, you’re paying for the entire purchase price of the car. With a lease agreement, you’re paying for how much the car is going to depreciate while you have it. This means that you’re financing a smaller overall amount, and you can expect lower monthly payments with a lease than a car loan.
Mechanical problems aren’t nearly as much of a concern when you lease a car, because it will likely have the manufacturer’s warranty during that time. All you need to cover is basic maintenance, and if any major repairs are needed, the warranty should cover it.
With a lease agreement, you can either purchase the car at the end of the agreement or return it and lease something new. It’s a convenient way to get a new car with the latest features every couple years.
Cons: Potential Issues with Leasing
The most important point to keep in mind with leasing is that you won’t have anything to show for the money you spent when you reach the end of your lease. If you finance a car, you’re putting your money towards something of value. When you finish paying off the loan, the car is yours. If you go the leasing route, you’ll essentially always have a car payment.
Every lease agreement will have annual mileage limits, and the usual amount is 12,000 miles. Going over that limit results in per-mile overage charges. If you need to drive long distances often, leasing may not be the right choice.
When you lease a car, you also need to keep it in good condition. If there’s anything more than the standard wear and tear specified in your lease agreement, you either need to get it repaired before you return the car or the dealer will end up charging you for the repairs. You have less room to customize a leased car, because you’ll need to get it back to its original condition before returning it.
Pros: Advantages of Buying a Car
The chief advantage of buying a car is that once you’re done paying off the loan, the car is yours. Your payments are going towards something of value, and if you decide to sell the car, you can at least make some money off it. You can also continue driving it and live car-payment free.
You don’t need to worry about how many miles you put on your car when you buy it, which is helpful if you have a long commute. Although excessive wear and tear will lower your car’s value, you aren’t responsible for keeping it in its original condition. This also means that you’re free to customize your car as much as you want and make it your own.
Cons: Potential Issues with Buying
When you buy a car, you need to make a much larger financial commitment than you would if you were leasing. Although there can be down payments with both buying and leasing, they’re more common when you buy. A monthly loan payment will cost more, on average, than a monthly lease payment for the same car.
Although you’ll own your car once you finish paying off the loan, that could also be the time when it starts to develop mechanical issues. After the warranty ends, you’ll need to pay for any repairs that the car requires, and those can be costly. You’ll need to spend your time and money taking your car to a repair shop, which are both concerns you don’t have when you lease.
If you want to get a new car, the process is much easier when you leased a car compared to when you bought one, since you only need to return the lease and get something new. When you own a car, you need to sell it yourself or trade it in at the dealership. Trading it in saves you time, but selling it yourself will likely get you more money.
Choosing Between Leasing and Buying
Whether you should lease or buy will depend entirely on you. Consider what you want in a car and your typical driving habits to figure out which is the superior option.
Leasing tends to work better for people who don’t mind having a monthly car payment and appreciate being able to drive the latest car models. It’s a good choice for people who prefer convenience and don’t want to be bothered with paying for car repairs. Those who want to lease should make sure they don’t need to drive more than 1,000 to 1,250 miles per month, because even the most flexible lease agreements max out at 15,000 miles.
Buying works well for people who want to have a car that they can call their own and customize at any time. It’s the better choice for those who don’t mind dealing with the occasional repair and like the security of eventually owning a car. People who put quite a bit of mileage on their cars should always buy to avoid costly overages.