Buying vs. leasing a car
What’s most important to you in a car? The make and model? The color? The number of cup holders? Every car shopper has different needs, which brings us to the debate between buying and leasing a car. What makes sense for one driver may not make sense for another. That’s why it’s important to understand the key differences between buying and leasing so that you can figure out which option best satisfies your wants and needs.
Leasing a car means lower monthly payments
The key difference between buying and leasing is that leasing is basically renting a car. You’re not paying the full purchase price, and you won’t own the car at the end of your lease. Generally, leases run between two or three years. However long the length of your lease is, the amount you’ll pay is how much the car will depreciate over the term of your lease, plus interest and fees.
So why pay for something you won’t own? Leasing can be more cost-effective than buying, at least in the short-term. Your down payment will be less than what you’d have to put down for a purchase, and your monthly payments won’t be as high, either. It’s less of a financial burden. You’ll also be able to drive a newer model and you won’t be on the hook for certain repairs because late-model vehicles are usually covered by the manufacturer’s warranty.
But there are drawbacks to leasing a car. The owner of the lease contract can set a limit on the number of miles you can drive and even charge an excess mileage penalty. There’s also the expectation that the car will be returned in good condition, otherwise you could be charged for “wear and tear.” Finally, the end of your lease means you’ll have to find a new ride.
Buying a car means all of the perks of ownership
It’s simple: If you want to own the car, you have to buy the car. When you’re the owner, you can drive it as many miles as your heart desires. Once you’ve paid off your car loan, the car is yours and you can own it for as long as you’d like it. You can even trade it in if you want. The end of your loan also means no more monthly payments. The car is all yours, no strings attached.
But there are costs that come with being a car owner. To start, you’ll be paying for the full purchase price as part of your loan, plus interest. That generally means a bigger down payment up front and bigger monthly payments than you might have with a lease. You’re also responsible for maintenance and repairs. Those are all coming out of your pocket.
Buying a car is a big financial decision, so you need to be sure you can handle it.
Should you buy or lease a car?
There is no right or wrong answer. It’s about what’s best for you. If the short-term cost-effectiveness of leasing is what your situation calls for, then sign the lease. But if you’re ready to become a car owner and take on all that comes with it, buying is the way to go.
If you have any questions about the car loan application process, please get in touch with us. We’re happy to help you get behind the wheel of your next car!