When new car shopping, one of the biggest considerations is how to pay for it: lease versus buying.
Which option should you choose? The same answer may not be right for everyone. It depends a lot on your means and what’s important to you. Let’s take a look at some of the advantages and disadvantages to leasing or purchasing a car.
-Leasing is an attractive option for those wishing to get a new car every few years.
-Because you’re only paying for the portion of the vehicle’s worth you will “use up” instead of the vehicle’s total worth, lease payments are often lower and sometimes require less money down.
-Maintenance and repairs on the vehicle are often less costly because warranties usually cover the vehicle for the three years a standard lease runs.
-You may be able to afford a more expensive car leased than you could if buying.
-Dealers often run lease specials which can result in great deals (read the fine print!)
-You don’t actually own the car, so when the lease is up, you have nothing to show for the money.
-Insurance is often higher to include gap insurance—the difference between what you owe and what the vehicle is actually worth.
-Lease deals usually include a pre-determined amount of mileage per year, generally 12,000 or 15,000/year. If you go over, you could end up with an exorbitant fee per mile.
-You will be charged (and perhaps heavily) for any excessive damage to the car when you return it.
-You start the car shopping process over again every 3 years, which can include down payments that often.
-Your payments will leave you with something to show for the money.
-You have equity in the car.
-Once you pay off your loan, your insurance plans can often be switched to result in drastically lower payments.
-Dealers often have buying incentives at the end of each model year. This can include manufacturer rebates and other attractive discounts and programs.
-You can trade in an old vehicle when shopping for a new one.
-Your vehicle’s worth depreciates 20-30%, depending on make, as soon as you drive it off the lot–which means if you choose to trade it in or re-sell, you may get far less for it than you think.
-Typically people hold onto bought cars longer–which can result in hefty repair costs after warranties have expired.
-Payments are often higher on a purchased vehicle and often require larger down payments.
The question of lease versus buying is not an easy one. Make sure to shop around to ensure either way, you’re getting the best possible deal. With thorough research, you’re more likely to end up with the option that works best for you.