Should I lease or buy my next new car?
Pros and Cons of Buying and Leasing a New Car
Pros of Buying
- Once you pay off any financing, the car is 100 percent yours; you don’t need to pay anything other than the standard costs associated with owning a car.
- Buying a car gives you the freedom to treat the car as your own. This is most relevant when it comes to mileage. When you buy a car you can put as much mileage as you want, but putting too many miles on a leased car will result in fees.
- Finally you have the opportunity to gain equity if your loan payments outpace the vehicle’s depreciation.
Cons of Buying
- Cars are depreciating assets, they lose value over time. If you own the car, that depreciation is your responsibility when you try to sell or trade the car.
- Loans are generally more costly than leases. And, if you aren’t able to put enough money down up front, you run the risk of incurring compound interest on your loan.
Pros of Leasing
- When leasing, your payments are only for the difference between the vehicle’s starting price and the predicted depreciation value of the vehicle. So at the end of the lease, you don’t have to worry about reselling the car at a lower value.
- Leases are generally cheaper. Your monthly payment will be more manageable , giving you more car for your money’s worth.
- Leases ultimately give you a more predictable cost of ownership than buying a car.
- You can get a new car every couple of years if you are a habitual leaser
Cons of Leasing
- You are held to a certain amount of miles per year, and if you go over, it can get pricey quickly.
- Leasing will not generate any equity.
- You are financially responsible for anything beyond normal wear and tear on a leased car. Read up on modifications you can make because they are usually limited.
Ultimately the decision is a personal one, but the big factors are how much money you can gather up front and how long you want to use the car. If you plan on driving your car for 10 years and can front a substantial down payment, buying may be the right choice. If you don’t want to commit to that and want a more manageable payment, a lease could be the perfect solution.