When it comes to the buying cars, many people wonder if they should lease or buy. Should you lease or buy a car? Continue reading to know what to do and make your decision easier.
I’m assuming you already know what it means when you buy a car. But in case you don’t know what leasing means I’ll explain.
What Leasing Means
Leasing is another name for rent.
A lease is a contract outlining the terms under which one party agrees to rent property owned by another party. It gives the ‘tenant'(you) use of an asset and guarantees the lessor, the property owner or landlord, regular payments for a specified period in exchange.
Leasing a car means you get to use the car for some time and pay the car owner/dealer rent.
So basically, a car lease gives you a brand-new car for a low monthly payment. Period.
Although the decision to lease or buy a car has financial implications—money isn’t the only factor you should consider.
I’m going to first give you the pros and cons of leasing and buying a car. Then I’ll tell you which is better according to help you save more money.
Pros of Buying a Car
- The car will be yours
- You can drive as many miles as you’d like
- Customize your vehicle the way you want it (I love pimping my car to suit my style)
- You can build up trade-in or resale value
- Option of driving your car for years to spread out the cost
- There is no risk of possible lease-end charges
The ability to do whatever you want with your car is a great feeling.
When you own your car, you can drive as much as you want and customize to your heart’s content: you own your vehicle.
As long as you are committed to driving your vehicle for an extended period of time and have adequate car insurance coverage, you are unlikely to lose out financially, as long as you make a sufficient down-payment and perform proper maintenance.
Other benefits of buying a car
- Paying less over the long term. Monthly lease payments are generally less expensive than monthly car loan payments. However, with each loan payment, you can build up equity for the future when you decide to sell it or trade it in. Buying a vehicle and driving it for several years after you pay it off can be the cheapest way to own a car. The longer you drive it, the less it costs.
- Have the option to sell it. As a car owner, you have the flexibility to trade it or sell it (and pay off any existing loan balance) at any time.
- No mileage limit. When you need to drive a vehicle as many miles as you want, it’s much better to own it. Leases put caps on the number of miles you can drive and charge a hefty fee when you exceed the limit.
- No restrictions on appearance. If you want to use a car or truck without having to keep it in perfect condition or want to accessorize it, you should always buy it.
- Discount the depreciation. Depending on the vehicle, 20% to 40% of its depreciation can occur within the first few years. So when you buy a 2- to 3-year-old-vehicle, you get the advantage of paying a price that reflects a substantial depreciation discount.
Cons of Buying a Car
- The monthly payments will be higher than a lease
- You’ll have unexpected post-warranty repair costs
- When you want a new car, you’ll be responsible for trading it in or selling it
Pros of leasing a Car
- You’ll typically have lower monthly payments than an auto loan
- You’ll get to experience the excitement that comes with driving a new car every two or three years
- You’re always protected by a warranty
- You don’t have to worry about trading or selling your car later on
If you’re looking to keep your monthly expenses low, a lease might be a good option for you.
A typical car lease payment can be up to 60% lower than your monthly payments would be if you were purchasing the same vehicle and financing it with a traditional personal auto loan.
The warranty is also a huge plus: it can be incredibly frustrating when your newly purchased car has a major mechanical problem shortly after the warranty runs out and you don’t have comprehensive coverage.
With a lease, you never have to worry about anything happening to your vehicle: No matter what, you’ll be covered.
You also don’t have to go through the stressful, costly, and time-consuming process of selling your vehicle and haggling over the price.
Cars depreciate quickly, and they’re hardly an investment unless you’ve purchased a rare or classic car: Leave the hassle of dealing with a depreciating asset to someone else.
Other benefits of leasing a car
- Lower monthly payments. The cost to lease a car is typically much lower than to buy one. Little or no down payment is required, and you don’t have to pay any upfront sales tax. However, when you return a leased vehicle, you may have extra charges for racking up mileage that exceeds the allowable limit, terminating a lease early, or having any unrepaired damage.
- Never being “upside-down.” When you lease a car you rent it for a fixed term, which is typically one to 4 years. The amount you pay each month is tied to the amount of depreciation that’s expected during the lease term. (Different makes and models of vehicles depreciate at different rates.) You only pay for the depreciation of the car that occurs during your lease term and you can never be “upside-down,” which is a common situation where vehicle owners owe more than their car is worth.
- Fewer repair expenses. If you’re covered by a manufacturer warranty during your lease term, you never have to worry about getting hit with a large, unexpected repair bill. However, you are still responsible for regular upkeep, maintenance, and the minimum amount of auto insurance required by the state where you live.
- Driving a new car more often. If you lease a new vehicle every few years, you will always have the benefit of driving a car with the most up-to-date technology, comfort, and safety features.
- Never having to sell a vehicle. Once a “closed-end” lease term expires you can simply return the vehicle. But you never have to go through the hassle of selling a vehicle yourself or being concerned about getting a fair trade-in value. Or you may have the option to buy a vehicle at the end of the lease term for a pre-set price. That could be a good idea if the vehicle is worth more than the agreed upon purchase price—or a bad idea if it is worth less money.
- No loan approval required. If your credit is bad, you may not be approved for a car loan. Leasing companies typically aren’t as strict as lenders because they can easily take back the vehicle if you don’t make payments or if you violate any lease term.
Cons of leasing a car
- You must have a stable and predictable source of income
- There is a set number of miles you can drive throughout your lease term
- You must consistently and properly maintain your car
- In most cases, you must purchase gap insurance
- You will likely pay more over the long haul than you would if you had purchased the vehicle.
That’s it guys. Do you want to know what I think?
I think you should buy a car.
Not a brand new car.
Buy a car that has spent two years on the road and is still in good shape.
That way you don’t have to pay overhead fees if you buy a brand new car from a car dealership.
What will your decision be? Are you going to lease or buy a car?
You have read the pros and cons of both buying and leasing a car. And you have read what I would do.
What will you do now?
Are you going to lease or buy a car?
Let us know in the comment section.