Should you buy or lease your next car? That’s a tricky question, but having information on both will help you choose. Here are the tops pros and cons of each.
Buying a car isn’t as straightforward as just walking into the dealership, giving them your money, and driving off the lot with it. When it comes to actually paying for that car you want, you have a few options.
The two main options dealerships will give you are leasing or buying the car. A lease is when you enter into an agreement with the dealership to pay a monthly rate to the manufacture's lender or bank for the car. You are essentially just paying to use the car until the end of your lease.
Buying, or financing, a car refers to taking out a loan in order to pay for the car. You will still have monthly payments, but they will be made to the bank or loan lender. And when it’s all paid off you will actually own the car.
So you’re probably wondering should I lease or buy a new car? There are pros and cons of both options. But it really comes down to your situation and what is right for you. We’ve broken down the pros and cons of leasing vs buying a new car, so you can get a feel for what you might want to choose.
Leasing: The Good Stuff
When you lease a car, you are paying for a portion of the car instead of buying the whole thing up front. Depending on the terms of the lease, you will pay a certain amount as a down payment and then make monthly payments after that.
There are both good and bad sides to leasing a vehicle. Depending on how long you want to keep the car, how much you will drive it and what kind of car you want, a lease could be a great option. Despite many car-buying myths, it is possible to get a great deal on a lease.
Many people go with leasing because they can get a nicer car for a lower price today. It could be just what you need to get a car you like, at a price that you can afford.
The pros of leasing:
- You can have lower monthly payments, with low or no down payments
- You can get a better car for less money upfront, and get a new car more often
- The option of leasing to buy allows you to start with low payments up front and no restrictions on miles. Then you can refinance at the end of the lease with an extension to finance and guaranteed buyout price.
- There will be a 3 year warranty on the vehicle
- You will pay less taxes
- No trade-in hassles at the end of the lease
- If you’re leasing a car for your business, you can expense 100% of the payment, insurance and maintenance of the car
- Most leases come with standard GAP Insurance, meaning that if there is damage to your car and the value depreciates, you no longer have to pay off the full value of the car. The insurance will cover the gap between the actual cash value of the car and the amount still owed on the financing
Leasing: The Bad Stuff
That being said, leasing does come with it’s own set of negatives, like all things that seem too good to be true. Many salesman try to push leases on customers because they can get more money in the long term.
Just because they want you to lease your new car, doesn’t mean you have to. It can seem like a great deal, but you really have to look at what you’re paying and how the costs and fees break down before you get a lease.
Make sure you ask the right questions when you’re talking to the salesman. Their responses may affect what you choose to do. But it’s a good idea when trying to decide if leasing vs buying a new car is the best route for you, keep these things in mind.
Cons to leasing:
- You won't actually own the car, so you can’t really do whatever you want with it
- You usually will have a specific amount of mileage you can put on the car per year
- If you’re buying a pre-owned car, a lease won’t be of much benefit to you
- If you plan on keeping the car for more than 8 years, a lease will cost you more than financing
- Terms and contracts can be confusing and unclear
- Ending a lease early can cost you a large amount out of pocket
Buying: The Upsides
So, if you’re not leasing your new car, what do you do? Answer: buy it. When you buy a car, you usually have to take out a loan in order to make the payment. This means you’ll still have a monthly payment, but you own the car at the end of the loan.
However, if you can swing the large payment, buying the car upfront could have some great advantages for you. For starters, it will really be your car, so you can do with it as you please.
Pros to Buying:
- You own the car when the loan is paid
- You get to do what you want with your car (yellow stripe on the side? Why not!)
- If you plan to own the car for longer than 7-8 years, you save money in the long term
- You’re able to drive it as much and as far as you like with no restriction to mileage
- You have the ability to sell the car whenever you want/need
- No need to worry about damaging the car or your kids making a mess
- You can possibly use your car as a trade-in on your next car
Buying: The Downsides
Of course, nothing in life is ever perfect. Buying a car may seem like a nice deal, but it’s not always the best option. There are still downsides to paying upfront for your new car, even if you can afford it.
Cons of Buying:
- A higher down payment to avoid owing more than the car is worth
- Monthly car payments will be higher than with a lease
- After the warranty expires, you pay repairs yourself
- Your cash will be tied up in your vehicle, which depreciates in value
- If you have a business, you can only expense the depreciation of the vehicle
Which Do You Chose?
That’s the ultimate question, isn’t it? But in the end, only you can decide which one is right for you. Take some time to consider your options, you circumstances, and your finances. Use this article to help you decide between leasing vs buying a new car.
Be honest with yourself about what you can afford and what you need. Don’t get yourself in a situation where you may end up paying or owing more money than the car is actually worth. And if you’ve already made the decision, see a full inventory of our new and used cars to get started finding your next car today.