If you’re in the market for a new car, then you’re most likely sorting through the inner debate of “leasing vs buying… which one is right for me?”.
Truth be told, they both have their strengths and weaknesses. What might make sense for you wouldn’t be the right situation for someone else.
You may be asking yourself questions such as “what is leasing a car?”, “is leasing a car a good idea?”, or “what are the pros and cons of leasing a car?”. Fortunately, you’ve clicked on the perfect article to address these questions.
See below for an in-depth guide on the pros and cons of both leasing a car, as well as buying a car.
Pros and Cons of Leasing a Car
Everyone has considered leasing a car at one point in time. The opportunity to get a newly-released make and model at a lower price is attractive to a lot of people, and justifiably so.
However, the low price also warrants the age-old question: “what’s the catch?”. Here are the pros and cons of leasing a car as your next vehicle.
Pro: Lower Monthly Payments
This is quite possibly the main reason you’re considering leasing a car in the first place. Rather than shopping around for a used car within your monthly budget, you can pay the same amount for the latest model.
There is also the potential to avoid certain fees and not have to make a sizeable down payment. Perfect for those of you that had your current car give out on you and are unexpectedly in need of a new car.
Having a lower monthly payment and avoiding fees can help you plan for the cost of your car insurance premiums. Don’t forget to factor those into the car that you purchase.
Con: Limitations on Mileage
Of course, with a friendlier price comes a few caveats. Since you’re leasing the car, you have no ownership over the vehicle. You’re (for lack of a better term) borrowing the vehicle from that dealership.
Because of that, they have the say-so on how many miles you’re limited to within the duration of the lease. Some break it down on a yearly amount, others on a monthly amount.
If you were to go over those miles, then you’ll be charged anywhere from 15 to 20 cents for every mile you run over.
Pro: Drive Brand-New Models
Perhaps you’re not at a place where you can afford to drop a sizeable down payment on a new car. Maybe you’ve had your eyes on a new model that you’ve wanted for a long time.
If so, then the opportunity to drive a brand-new car model might be really intriguing to you.
Even if you have your eyes on one model, try to keep an open mind. Even with the lower prices on a lease, the vehicle you want might still be stretching your monthly budget. Remember to prioritize the price accordingly.
Con: Not a Long-Term Solution
The main drawback of a car lease is that it isn’t a long-term solution. In only three years (the ideal length for a car lease), you may very well find yourself looking for another car.
When the lease reaches its end, you will have three options: 1) trade it in, walk away from the lease and pay all necessary fees (mileage fees, upkeep fees, etc.) or 3) buy the car.
If the prospect of shopping around for another car in three short years doesn’t sound intriguing to you, then a lease might not be in your best interests. Of course, the flip side of that is that you could potentially get another new model in three years.
Pros and Cons of Buying a Car
Some of you out there want full ownership of the car. You want your monthly payments to apply towards paying off the cost of the car and becoming the sole owner of it in (ideally) 60 months or less.
If that’s the case, then buying a new car is the right way to go. It can give you more control and financial freedom than a car lease. Here are a few of the biggest pros and cons of buying a car.
Pro: No Charges/Fees Hanging Over Your Head
Many people that have leased a car before will tell you that the thought of going over your mileage limits is a strong burden to bear. It hangs over you like a dark cloud.
By buying your car, you can either purchase it with cash or receive a car loan to pay back to gain full ownership of the car shortly. There won’t be any unforeseen charges tacked on in three or more years as can happen with a lease.
You can drive your car as much as you’d like, never having to worry about wear and tear charges, mileage fees, or any other terms and conditions the leaser might have.
Con: Down Payments are Necessary
While you may not like them, down payments are necessary evil whenever you go to buy a new car. It levels out the cost of the loan, helping you pay less interest over time.
Believe it or not, down payments don’t have to be a “con” at all. If you know you’re in the market for a new car shortly, start aggressively saving for one.
That way, you can lessen the amount that you take from your savings account and you get to lower your monthly payments at the same time.
Pro: Full Ownership of the Car
The monthly payments that you’ll make will be a bit easier to swallow knowing that you’re working towards full ownership of your car.
For those of you that enjoy customizing your car, you’ll be able to do whatever you like to it even while you’re paying off the loan. Once you’ve paid off the loan, you can either drive it loan-free or sell it to get back a sizeable amount of your investment.
To sell the car for as much as possible, you’ll want to keep it in prime condition. be sure to give it proper car maintenance from day 1 to protect your future sale.
Con: Higher Payment Increments
Again, placing a larger down payment can prevent you from having to pay higher monthly payments on the car.
However, the monthly payment amount shouldn’t be your main focus. You need to prioritize the total cost of the car. Otherwise, a car dealer might try to slide you into a longer loan.
For example, to lower your monthly payments, they might try to extend your loan from a 60-month loan to a 72-month loan. Come pre-approved with a 60-month loan in order to avoid this scenario.
The Costs of Leasing vs Buying a Car
As mentioned earlier in this article, it’s important to figure out which option is the best for your situation. That said, most experts would agree that leasing a car is a short-term solution while buying a car is more of a long-term investment.
Buying a car requires a down payment to lower the monthly payments, which is usually around $3,000 or so. While leasing a car doesn’t require a down payment, you’ll end up spending around that same amount on fees and charges, which you won’t get back.
When you’ve paid off the car that you’ve purchased, you have a significant amount of value left in the car. Once the lease is up, you have zero value left. You’re left to find another car and get yourself involved in an entirely different lease.
Due to depreciation, both methods will cause you to lose money over time. However, by buying your cars, you can avoid any out of pocket expenses that you’d be forced to pay on a car lease. Be sure to keep that in mind.
Frequently Asked Questions
Is Leasing a Car a Good Idea?
As you’ve read above, there both pros and cons of leasing a car. You get the opportunity to drive a brand-new car model and pay lower monthly payments on the car.
However, there are limitations on mileage and you’ll likely have to pay wear and tear charges at the end of the lease.
It’s a good idea for those of you that might not be able to afford a down payment or are looking for a short-term solution (2 to 3 years) for your car needs.
What Is Leasing a Car?
Essentially, the main idea of a car lease is to give you a new car without forcing you to pay hefty costs such as large down payments or monthly payments.
It’s a tremendous option for those of you that either can’t afford to take out a car loan or are trying to avoid doing so for a few more years. However, you’ll want to make sure you don’t lend the car you’re leasing to other drivers such as friends and family.
Once the lease is up on the car, you’ll either return the car or take out a loan to purchase the car from the dealership.
Is It Better to Lease or Buy a Car?
The answer depends on your situation. Leasing a car is viewed more as a short-term solution while buying a car is an investment.
For those of you that have the money to pay a down payment and work towards paying off a loan, you should probably elect to buy a car rather than lease one.
If money is a bit tight and your current car broke down or you can’t afford to take out a loan, then leasing a car might be the best option for your needs.
Is Leasing a Car Worth It?
At the end of the day, it’s better to lease a car than not have a car at all. So, if those are your only two options then, yes, leasing a car is absolutely worth it.
It allows you to drive a new model around while saving up to 20-percent off your monthly payments.
Leasing a car, however, doesn’t offer any value for you at the end of the lease. You’ll return the car, not getting any money back in return.
Why Leasing a Car Is Smart
Leasing a car is smart if you need a reliable car but don’t currently have the budget to pay for a loan. It can give you the chance to pay lower monthly payments and small down payment if any at all.
Many people lease a car with the intention of buying a new car down the line. They take advantage of the lower monthly payments by saving up money to one day put towards a down payment on a new car they wish to buy.
What Are the Disadvantages of Leasing a Car?
There are essentially three main disadvantages to leasing a car. First, you will have limitations on how many miles you can drive in a calendar month/year.
Second, if you do go over those mileage limitations (which many people do), then you’ll be forced to pay a fee of anywhere between 15 to 20 cents for every mile that you go over.
Third, leasing a car isn’t a long-term solution. You won’t own the car at the end of the lease, so all the monthly payments you’re making are a temporary answer.
Leasing vs Buying: Choose the Right Path for You
No matter which path you choose after debating between leasing vs buying a car, just make sure it’s the right fit for your needs. Take time to consider each.
Regardless of whether you lease or buy, be sure to use this car insurance shopping checklist while you look for insurance on your new car.
Be sure to start that process by reaching out to receive a free quote for your car insurance needs. We will be happy to assist you further.