Buying vs Leasing a Car
Not surprisingly, many people don’t understand all the reasons why you might buy versus lease a car. If your parents always got cars one way, there’s a good chance you’ll do the same without considering both choices.
But there are compelling arguments for each option. Not everyone is in the same boat and there are several questions you should ask before making a decision.
Is a car lease right for you?
In most cases, the monthly payments on a car lease will be lower than a car loan. But there are a number of other features you need to take into account when considering if a lease is the right option.
Leasing a car may be right for you if you answer yes to one or more of these questions:
- Do you usually upgrade your cars every three or four years?
- Do you own a business which can make the payments?
- Do you drive less than 15,000 miles a year?
- Do you always want to be covered by a manufacturer’s warranty?
- Would you like to spend less for car payments in the short term?
- Do you want to try a vehicle for a while before buying it outright?
Alternatively, car leasing probably isn’t a good option if you answer yes to one or more of these questions:
- Do you rarely buy a new car and typically keep vehicles for longer than five years?
- Do you look for ways to maximize the value of every dollar you spend?
- Do you drive over than 15,000 miles each year?
- Are you able to repay a car loan in full over the next five years?
How does a car lease work?
When you lease a vehicle you never actually own the car. Leasing is much like renting – you pay a proportion of the value to the owner for the use of their car, and give it back at the end of the agreed term. Leasing is popular with people who cannot afford to buy an expensive car outright, but are willing to make lower payments to drive the car for a few years and give it back at the end of the term.
If you use your car for work or you run your own business, then you may be able to make deductions on your taxes for car payments and some maintenance costs.
Even though leasing a car means you are paying more in the long run, it does enable you to free up funds in your budget in the short term while providing you and your family with a new, reliable, and comfortable drive.
What are the pros and cons for buying or leasing a car?
The decision to buy or lease a new car comes down to the type of person you are, and what is important to you. However, considering the pros and cons for both leasing and buying a car will allow you to make an informed decision with both your heart and your head.
Car Payment Calculators: Enter your own numbers into a loan or lease payment calculator to see how much you’ll spend.
If you’re looking for the most economical option in the long run, car buying is probably the best option. A key advantage is that after the loan term ends, the vehicle belongs to you. You can avoid many car payments by keeping cars for a long time.
However, if you can treat your car as a business expense or like to have the new model every few years, then leasing might be a better option for you.
Car Buying Tip: Before you even consider a loan or lease, you should negotiate the purchase price of a car. In order to get the best deal, discussions about a loan or a lease should be postponed until the car price is settled.