Is It Better to Lease or Buy A Car?

It’s hard to decide if you should lease a car or buy one. Both come with their pros and cons. However, certain factors will help you determine which is a better choice for you.

While some drivers want to save more money, others would rather go for the connection and status that comes with having a brand new car.

Beyond personal preferences, what else should you consider before making your decision to lease or buy a car?

The Difference Between Buying and Leasing A Car

Leasing a car involves renting from a dealer for a specific period of time ranging from 36 months and above. Based on the time agreed between you and your car dealer, you have the choice to either return the car or buy it at a fixed price which is included in your lease contract. 

On the other hand, buying a car means an outright acquisition of a vehicle from the car dealer. You can either make an upfront payment or use a car loan. If you’re using a loan, the car becomes yours when the loan is fully repaid.

Leasing a car

A typical car lease is paid for through the dealer. When you lease a car, you pay an initial sum of money. The amount of money you pay enables you to cover a series of taxes and fees that come with the process.

After the initial payment, you are allowed to pay monthly within the duration of your lease. You make these payments according to the agreement between you and the car dealer. The monthly charges cover the depreciation of the car due to usage and exposure.

While there is an ongoing lease term, you are restricted to a certain number of miles and mandated to return the vehicle in good condition. Failure to do this will attract extra fees.

The Benefits of Leasing a Car

1. Save more money. Leasing a vehicle attracts lower payments. This is good for you if you want to maintain a decent expenditure and cut down on monthly expenses. If you eventually decide to buy the car, you’ll be paying for it at a lesser price when compared to buying. You also don’t have to worry about fluctuations or the future price of the car because the price will be predetermined in your lease agreement.

2. Maintenance is easier. Leasing a new car gives you access to a long-lasting warranty from the manufacturer. Basically, this lasts for as long as three years. While you enjoy your lease and low-cost payments, you also enjoy quality maintenance without having to worry about maintenance expenses.

3. Don’t worry about reselling. A lease allows you to return your car to the dealership. So, instead of going through the long process of seeking buyers and handling tiring bargains with a private buyer or car dealership, you only have to pay the end-of-lease fees and other additional costs on the vehicle.

4. Easy switch. If you like the idea of having a new car for different seasons in your life. Leasing is the way to go. This is because you can easily get another new car whenever your old lease expires.

5. You can take advantage of tax deductions. When compared to loans, a car lease gives you more write-offs on taxes. The IRS permits you to deduct financing and depreciation costs associated with monthly payments. Although, this amount is limited when dealing with luxury vehicles. It still helps you save a tangible amount of money.

The Disadvantages of  Leasing a car

1. Depreciation. A car lease may cost more eventually when compared to an equivalent loan. This is because you’ll be paying for the vehicle after a period of usage and depreciation at this point is rapid.

2. Mile limitations. A lease agreement gives you a limited amount of miles to run. Going over the limit attracts a penalty on excess mileage. This does not work for someone who consistently drives long miles.

3. The payments keep going. If you are prone to leasing different cars or wish to renew your lease instead of buying the car, the monthly payments will keep coming. As a result, you are never really debt-free and the vehicle still isn’t yours. With a car loan, you only have to pay off the loan and enjoy using your car.

4. Wear-and-tear charges. With a lease contract, you are mandated to pay for any wear and tear of the vehicle when you eventually return it to the car dealership. So if you’re not a very careful driver, it’ll cost you a good amount of cash.

Should I Lease a Car?

Leasing is a good call for you if you want to use a vehicle without making a huge initial payment. Leasing will give you a more payable monthly cost and allow you to enjoy luxurious vehicles without putting a dent in your finances.

However, if you have to take long trips on a regular basis or go through pretty rough routes, leasing might not be the best choice for you.

Buying a Car

Buying a vehicle involves taking acquisition of the car either through an upfront payment or a car loan. If you want to buy a car, you have various options like certified pre-owned cars or used cars, and brand new cars.

What is a Car Loan? 

A car loan includes getting a large sum of money to purchase a car. The loan is repaid on a monthly basis and the car becomes yours upon completion. Car loans often come with interest over the duration of repayment according to the agreement. Compared to leasing, a car loan is higher. 

Benefits of Buying a Car

1. Zero mileage limits. Buying a car doesn’t come with mileage restrictions so you do not have to worry about paying for every extra mile you drive.

2. No charges on wear and tear. Buying a car does not attract normal wear-and-tear costs which are usually demanded by the car dealer in a lease agreement.

3. You own the car. The car is yours to own and love for as long as you want.

Disadvantages of Buying a Car

1. Higher initial payment. The upfront payment for a car could have a huge impact on your finances. Also, with a car loan, a larger initial payment reduces the sum you need to borrow and the cost of monthly repayment.

2. Monthly payments are higher. Buying a car means that you will probably spend more each month because of the additional interest. Especially if this is a luxury vehicle.

3. High maintenance costs. You have to take responsibility for the cost of frequent maintenance checks and repairs.

Should I Buy a Car?

The answer is yes if you want to take ownership of your vehicle and are certain that your finances can cover the cost of owning and maintaining a car. You can also buy a car if you do not want to deal with mileage limitations and want the liberty to trade your car at any time.

Leasing Vs Buying A Car: Which is Better?

Both Leasing and buying a car present various benefits and pitfalls. Your decision to buy or lease a car depends on how much your finances can cover at a time. 

You should take a thorough assessment of your cash flow. This will help you determine how much you are willing to pay upfront and what you can afford on a monthly basis. 

You should also consider your driving habits, the purpose of your vehicle, and the distance of your regular road trips. 

Bonus Tip: Consider various car dealerships and offers to find one that suits your budget and financial capacity before making a decision to buy or lease a car.