Investing in a new car is a serious life decision you should not take lightly. If you want a new vehicle, it’s important to weigh whether it’s most appropriate for you to buy or lease. This article will discuss what a lease is, the pros and cons of both leasing and buying, and whether you should decide to lease or purchase your next ride. If you are in the market for a new vehicle, keep reading for some tips and advice on leasing vs. buying a car.
What Is a Lease?
A car lease is one of the most popular types of auto financing. However, when you lease a car, you are essentially paying the dealership for the privilege of driving it for a certain amount of time. Therefore, you will never actually own it.
A lease offers you the affordability of a small down payment and a small monthly payment. Still, you’ll need to actually return the vehicle at the termination of your lease period or buy out the car for the rest of its market value if you want to keep it (if this is an option in your lease agreement). Additionally, leases usually restrict you to a certain number of miles per year or month, and they often require you to have good credit to sign one.
Pros and Cons of Leasing
Now that we are clear on what a lease is and isn’t, we can discuss some of the pros and cons of leasing a car. As you will soon see, the pros and cons on this list can be interchangeable, depending on your budget and how you view things. So, in this case, we’ve lumped the “pros” and “cons” together. There’s really no right or wrong answer. This list is not exhaustive, and there will probably be more pros or cons to your decision, depending on what you choose to do. It might also depend on the vehicle’s brand, the dealership, and even your individual salesman.
Pro: No Need To Pay For Repairs/Maintenance
Part of what appeals to people about leasing a car is that you usually are not responsible for most of the heavy lifting when it comes to repairs and maintenance. Obviously, this depends on your individual lease contract. But usually, your insurance costs and warranty pay for a lot of the more extensive repairs and maintenance to ensure the car is returned in the best possible condition. Of course, you will be responsible for standard car maintenance, which includes oil changes, tire rotation, refilling fluids, and the usual upkeep of the vehicle. However, if you’re careful, there are still many ways to maintain your car cheaply.
Pro: Not a Huge Commitment
Leases are great for those who don’t want the long-term commitment of buying a vehicle, as you can sign them for short terms. For example, leases are perfect if you are living someplace temporarily or only want a specific car for a year or two. In cases like these, if you make all of your payments on time and don’t exceed your maximum mileage, you can simply return the vehicle and walk away at the end of your lease commitment-free! This is unlike opting to pay off a traditional car loan, which might only be available in increments of eight, ten, or twelve years.
Con: Must Keep Car in Good Shape
One possible downside to having a lease is that you must keep your car in excellent shape for the entire duration of your lease. Of course, your vehicle will have general wear and tear from a year or two of use. However, it’s crucial that when it comes to scratches, dents, or tears in the interior, you either avoid them entirely or fix them as soon as they occur. This might be challenging if you’re someone who is very hard on cars. If you return your vehicle in significantly worse condition than when you leased it, you may be charged massive fees from the dealership.
Con: Not an Investment
One major pro to buying a vehicle is that it’s an investment. So if you eventually want to sell that vehicle, you typically get some kind of a return on it, however small that may be. But, a lease is the opposite of an investment. After paying tens of thousands into a lease at the end of a few years, you have to give the car back, and you get nothing in return. This is not an issue for some because it comes alongside the privilege of another new vehicle with no commitment. However, the lack of any financial return can be a major dealbreaker for others.
Pros and Cons of Buying
Now that we’ve gone over some of the pros and cons of leasing, we’re going to talk about the pros and cons of purchasing a new vehicle so you can get the complete picture.
Con: Long Commitment
Buying a car outright can be a very long commitment if you don’t have enough to pay for the vehicle in cash, and most people don’t. Low monthly payments could leave you stuck paying off a car for ten years or longer, depending on the financing method and contract you decide upon with your dealer. You may want to reconsider your options if you aren’t prepared to commit to a car for that long.
Con: Higher Cost
At the end of the day, you will generally pay significantly more to buy a car than lease one. Typically, you might pay half of the car’s value for a lease, while you’ll be expected to fork over the car’s entire value during your payment contract if you decide to purchase it. So, the financial commitment you’re willing to make is extremely important.
Pro: Full Ownership
The crucial pro to owning a vehicle is that you get full ownership of that vehicle, so you can do exactly what you want with it. You can get a new coat of paint on it, alter the wheels, or modify it however you like. If you have a lease, you (usually) have to return the car exactly how it was given to you, but this is not the case for a vehicle that you actually own.
Pro: You May Get a Return on Your Investment
As we mentioned earlier, when you lease a vehicle, you have no chance of getting a return on your investment. It’s similar to the idea of renting a property versus buying one. But when you eventually sell a vehicle you own, you can almost always expect to get at least something for it. For many people, this is important. Additionally, if you pay off your car loan, you may have some years where you have no monthly payments at all! This is a significant financial advantage to owning a vehicle instead of leasing one.
Should I Lease or Buy a Car?
Whether you decide to lease a car or buy one depends on how you weigh all of the pros and cons. Neither one of these options is inherently bad or good; both depend on your current financial situation, how long you want to have the car, and how much you are generally willing to spend. Hopefully, this article has helped you narrow down the true advantages and disadvantages of buying a car versus leasing one to help you decide which choice is best for you.