Is it time to find your next ride? If so, one of the first decisions you’ll have to make is whether to lease or buy a car. Both options come with their own advantages and disadvantages, so choosing between the two comes down to which is right for your situation.
Leasing a Car
When you lease a car, you make monthly payments to use it for the length of your lease (usually two to four years). After your lease is up, you return it to the dealer, although you can choose to purchase it at that point.
With a lease, you’ll have lower monthly payments than you would if you bought a car using a loan, because you’re only paying the depreciation of the car instead of its entire value. You won’t have to worry about unexpected repairs, because when you lease a car it’s under warranty. All you have to do is keep up with standard maintenance, such as oil changes and tire rotations. If you buy a car, you’ll probably end up spending money on unexpected repairs at some point in its lifecycle.
You don’t have to figure out what to do with your car when you don’t want it anymore like you would if you purchased it. After your lease is up, you can simply lease another car, which makes this a great option if you like to drive the latest cars every couple years.
The most significant drawback to leasing is that you’re making monthly car payments without building any equity in a car. Once the lease is up, you’ll have nothing to show for all those payments you made.
Leases have mileage restrictions that limit how much you can drive the car per year. The standard amount is 12,000 miles, but some leases have restrictions of 9,000 or 15,000 miles. If you drive quite a bit, you may exceed the mileage restriction on your lease and end up with expensive overage charges. You also have to keep the car in good condition since you’ll be returning it to the dealer at the end of the lease.
Buying a Car
When you buy a car, you either pay the entire asking price up-front or pay a down payment and obtain an auto loan to cover the rest. Once you’ve paid off the loan, the car is yours.
The obvious benefit of buying a car is that you will eventually own it. You can make money off of it by selling it, and you’ll be done with car payments after you pay off the loan. You can drive your car as much as you want instead of watching your miles.
You can modify your car however you want when you buy it, and you don’t have to worry about its condition, although it is still smart to keep it in good shape to preserve its value. If you like to keep cars for a long time, you’ll be better off in the long run by buying a car.
Buying a car is more expensive than leasing a car. You’ll either end up with a higher down payment, higher monthly payments, or both. The value on the car could also drop dramatically, especially if you buy a new car, which depreciates the moment you get it off the lot.
It’s a bigger commitment to buy a car, as it will take longer to pay off and you won’t be able to get a new car every couple years like you would with leasing. As your car gets older, you’ll have to prepare for repair costs.
Leasing is becoming more and more popular among car buyers who aren’t interested in the long-term commitment that comes with buying a car. If you don’t want to be tied to the same car for longer than a couple years and you want to avoid hefty repair bills, leasing a car may be the right choice. Those who want to build equity in their car and eventually own it will find buying better fits their needs.