Leasing versus Financing
When it’s time for you to purchase a car, is it better to lease or finance? It depends on a wide array of factors and your own needs. Each option has its advantages and disadvantages that are summarized below:
- Typically involves a lower monthly payment than financing.
- Can often be obtained with little or no down payment.
- Lower monthly payments means having the option of driving a better car.
- For the length of the lease, the factory warranty will be in effect, which means potentially lower repair costs.
- Makes it easier to get into a new vehicle every few years.
- You don’t have to go through the hassle of selling it or finding a good trade-in deal at the end of the lease.
- At the end of the lease you have to turn it in because you don’t own it, although you do have the option of buying it.
- There is a limit to the number of miles you can drive in a year, typically 12,000. Of course you can pay extra if you know you’ll drive it more than that.
- Ever try to actually read a lease contract? It’s full of legalese.
- You can’t make any significant modifications to the vehicle.
- In the long run, it costs more to lease than to buy a car and drive it for many years.
- If you turn in the car with excessive wear and tear, you’ll take a nasty hit to your wallet.
- If you decide you want out of a lease, it’s very costly to terminate it.
- You own it, which means you can modify the vehicle as you please.
- It costs less in the long run to buy a car and keep it for many years.
- There are no mileage limits, so you can drive it as much as you want.
- You can sell the car any time you want if you feel like making a change.
- Often you have to pay more up-front in a down payment to avoid being “underwater” or “upside down” because you owe more than the vehicle is actually worth thanks to rapid depreciation.
- Monthly payments on a purchase are typically higher than monthly lease payments.
- Once you’re past the warranty, you’ll be responsible for all costs to get things fixed.
- When you’re ready for another car, you have to go through the hassle of selling it yourself or finding a good trade-in deal.
In the end, it comes down to analyzing those pros and cons against your own unique driving needs and requirements. If you can live with the idea of always having a car payment because you like being in new vehicles every few years and can abide by the mileage constraints, then leasing might very well be a good option for you. But if your idea of driving means having the same car for as long as possible and the notion of tracking miles to stay inside of limits doesn’t make sense to you, then purchasing probably makes the most sense. It’s that simple!