If you are getting ready for a new vehicle, your number one consideration will likely be buying or leasing. It can be a complex decision for many people. Both options have impressive benefits, along with equal downsides. Choosing between buying or leasing a vehicle can be challenging.
Each person uses their vehicle for different purposes. If you simply need a car for your daily commute, you may consider leasing and changing things every few years. You may also want something more adventurous for some off-road fun; in this case, you might want to purchase a vehicle that you can customize. It’s really about your driving needs and preferences.
Whether to buy or lease may be a simple matter of out-of-pocket costs. For someone else, building equity in a solid asset is more important. Still, others are more concerned with the finer points like interest rates, lease end options, and depreciation. It’s up to you. Let’s take a closer look at a few pros and cons of leasing and buying a vehicle to help you make your decision easier.
The Main Differences Between Leasing and Buying
When you lease a car, you essentially agree to pay rent for a specific time. You can rent/lease a car for up to 48 months. At the end of your term, you can lease another vehicle or pay a predetermined amount on your leased vehicle as a purchase. Leasing is the way to go if you are looking for a lower upfront cost. You can usually be out the door with a new car for under a few hundred dollars.
You will own the car outright once you purchase it and will be responsible for its maintenance. This makes it an asset for which you are building equity if you have used private financing. There are no restrictions on how much mileage you can drive or how much customization you can do when you buy a car.
Pros and Cons of Leasing a Vehicle
Pros
- There is no doubt that leasing payments are a more affordable option if you are on a tight budget.
- The downpayment on a leased car may vary from dealer to dealer, but it is usually minimal compared to the downpayment on an actual purchase.
- You can replace your vehicle with something new every few years, which gives you more variety, along with allowing your vehicle to grow and change with your needs.
- There is very little maintenance required for a leased vehicle. Your dealer will handle any repairs, scheduled preventative maintenance, and recall issues under your warranty agreement.
- There is generally a lower rate of insurance compared to buying a car.
Cons
- Unlike buying a car, you do not own a car when you lease it, so you do not earn equity.
- There is often a strict limit on how much mileage can be driven or how much customization can be done to the vehicle.
Pros and Cons of Buying a Vehicle
Pros
- Nothing is better than having complete control and ownership over a vehicle when you buy it.
- There is no restriction on mileage or customization of the vehicle.
- In the event that you use your vehicle for business purposes, you may be eligible for tax deductions.
- It is generally cheaper to buy a vehicle than to lease a vehicle for a long period of time.
Cons
- The depreciation rate on your investment in the first five years can be up to 25%.
- Insurers charge a higher premium
- Owners are responsible for maintenance and repairs not covered by warranties
Endnote
It is important to consider the type of lifestyle you lead, the type of driving you do, as well as your financial situation when selecting whether to lease or buy a car. If you want a low monthly cost, leasing may be a good option. Think about leasing if you want to upgrade your car every few years. In addition, many people can lease luxury cars that would otherwise be unaffordable.
If you buy a car outright, you own it outright; if you finance it, you build equity. The expense of servicing or repairing it will be entirely up to you. You can drive, modify, and dispose of your car as you please. Consider all these factors to help you decide if leasing or buying a vehicle is your best route.
