If you ever go on a car shopping, you will probably be given two choices: Lease a car or buy a car. The most obvious difference between the two options is that with a lease, you get to drive a new vehicle every few years without dealing with the hassle of selling the automobile later. All you need to do is just hand over the keys to the dealer and drive away in a new car. On the other hand, when you buy a car, each payment you make builds equity and once you pay off your loan, the vehicle is yours. Sell it, donate it, or trash it (but if you buy a car outright without a loan, you will manage to save even more money).
That said, it’s never easy to make a call when it comes to choosing between the two options. Since you have asked about which makes the most sense, here is how you can figure that out.
What to Consider When Deciding Between Leasing and Buying?
When deciding between leasing and buying make sure to look at both sides of the picture. Ask most people and they will probably tell you that buying a car is better. From a financial angle, it’s true, given that you are willing to make higher monthly payments, pay back the car loan and keep the vehicle for a few years. In contrast, leasing can be a less expensive option to drive a brand new car. It’s also good if you are someone who loves to drive new cars every two to three years or so.
Unfortunately, there isn’t a clear-cut answer to this question because each option has its own set of pros and cons. At the end of the day, it comes down to your lifestyle and how you like to pay for things. For instance, if you need a swanky car for business, probably to entertain your clients, leasing is a convenient way to have a nicer car for less. Also, it might provide a good tax write-off. But, if you are someone who often tends to stick with the same vehicle for years, buying a new or used vehicle is perhaps the best option for you as long as it’s reliable. The basic idea for buying a car is you get to enjoy a few years without an auto loan payment. This is something many often forget.
You can say a lot of good things about both the choices, but eventually, it boils down to your priorities and personal tastes rather pure dollars and cents. Since everyone’s situation is different, here we have outlined the pros and cons of leasing and buying. Some of these pointers are financial factors while others relate to your lifestyle and needs.
Pros of Leasing:
- You don’t need to pay a down payment. Or you will have lower monthly payments.
- Drive a high-end car for less cash.
- The repair cost is low because you are covered under car’s included factory warranty.
- It would be a lot easier to switch to a new car with leasing after every two or three years.
- Evade trade-in hassle at the end of the lease contract.
- Payless sales tax.
SEE ALSO: Tips for Car Lease Buyers
Cons of Leasing:
- Technically you don’t own a car with leasing (though at the end of the lease you have the option to buy the vehicle).
- Typically, car mileage is limited to 12,000 miles per year (but there is option to purchase extra miles).
- You may find some unfamiliar terminologies in the lease contract.
- In the long run, you will pay more for a leased car than you will if you buy a vehicle out right and keep it for years.
- It is also likely that you may end up bearing wear-and-tear charges. It can be a nasty surprise at the end of the contract.
- It’s always costly to quit a lease early if your financial situation changes.
Pros of Buying
- You have the luxury to modify your vehicle as you please.
- In the long run, you will save more money if you buy a vehicle.
- There is no limit on the mileage so drive as much as you like.
- It gives you more flexibility since you have the option to sell the car whenever you want.
- You can use the vehicle as a trade-in on the next vehicle you buy.
Cons of Buying
- You have to allocate a huge amount for down payment to evade being upside down in the loan (owing more than what the car actually worth).
- The monthly car payments will be higher than lease payments.
- Unlike leasing, you have to bear the repair cost once the warranty expires.
- You are likely to face selling or trade-in hassles when decide to get a new car.
- A large chunk of your cash will be tied up in a car and it will depreciate in value.
In a Nutshell
In brief, leasing makes it more convenient to get a car for less. This is because you only pay for the use of the vehicle and that too only for two or max three years (in most cases) rather paying for the car itself. On the other hand, buying just frees you from all the restrictions involved in leasing for a very hefty cost.
Finally, it’s up to you to decide which option suits your needs and lifestyle by weighing the pros and cons.