Are you torn between buying or leasing your next car? Choosing between the two can be difficult, but there are pros and cons to each that might help you make your choice. Here is a guide to help you decide which option is the best fit for your needs.
Buying a Car
Buying a car enables you to gain ownership of the vehicle, making it your responsibility unless you decide to sell the vehicle. You may need an auto loan in order to make this purchase, meaning that you’ll have a monthly payment that is put towards paying off your loan and the interest on the loan. However, once this loan is paid off, the car is all yours. To learn more about how auto loans work, check out this helpful guide.
Pros of Buying a Car
There are many benefits that come with buying a car.
Those monthly payments are contributing towards your ownership of the car and once the loan is paid off, you own your car. While you may still have some depreciation, the cash value of the vehicle is yours and you are free to sell or trade in the vehicle whenever you’d like.
Along with the flexibility to modify or update your car, you also get the flexibility of unlimited mileage – meaning that you can use your car as much as you’d like.
Cons of Buying a Car
There are also cons to consider when choosing to buy a car.
One of those cons is depreciation – the value of your vehicle will typically decrease over time. Additionally, you may find that your monthly payment for a car is a higher monthly cost than leasing a car.
There are also costs associated with owning a car that you need to be prepared for, particularly long-term expenses. You’ll be responsible for all maintenance and repair costs for the vehicle, this includes oil and tire changes, engine fixes, and more.
Related: The Best Times to Buy a Car
Leasing a Car
In contrast to buying a car, leasing allows you to borrow a car for an agreed upon period of time. Throughout this time, you’ll have a monthly payment to cover your use of the car and the depreciation of the vehicle. You'll have limits and restrictions on vehicle use included in your leasing contract, so make sure you fully understand the agreement.
Pros of Leasing a Car
Leasing a car offers benefits that may make leasing a better option.
You can avoid some of the cost of depreciation and the stress of owning and selling a car. Additionally, newer vehicles will require less maintenance and you may even receive free oil changes as part of your lease.
Leasing allows you to enjoy a newer vehicle and the latest safety features and technology. This is an especially good option for those who like to upgrade their vehicles regularly.
Cons of Leasing a Car
Choosing to lease a car does come with the cons as well.
A leasing agreement comes with restrictions, like limited mileage and responsibility for the upkeep of the vehicle. Unlike an auto loan, leasing a vehicle means that you will have consistent monthly payments as long as you are borrowing the vehicle.
There are also fees associated with leasing that need to be accounted for. This includes your upfront fees like a down payments and then leasing fees for early termination, exceeding your allotted mileage, and for fixing up wear or damage.
|Leasing a Car||Buying a Car|
|Upfront Costs||May include first month's payment, security deposit, down payment, and tax and registration fees.||May require down payment for loan or full cost of car, taxes and registration fees.|
|Monthly Payment||Required. This covers the costs of depreciation and use of the vehicle, along with interest and fees.||Required only if purchased with an auto loan. This covers the purchase price of the car and interest accrued.|
|Maintenance Costs||You will be required to pay for maintenance and damages to the vehicle. Some lease options may include oil changes and other services for free with the lease.||You will need to pay all costs related to vehicle maintenance. This includes oil and tire changes, repairs, etc.|
|Additional Charges||Registration and licensing fees, along with other leasing fees which can include exceeding your agreed upon mileage or to offset depreciation.||Registration and licensing fees, along with interest on a car loan.|
|Ownership||You do not have ownership of the vehicle.||You are able to gain ownership of the vehicle, owning it fully once a loan has been paid off.|
|Customization and Modification||This is dependent on your contract, but typically you are unable to customize or alter the vehicle.||You can customize or modify the car to fit your liking, as long as it is within legal requirements.|
|Vehicle Return/Sale||Once your lease is up, you will return the vehicle.||If you decide to get rid of the vehicle, you have the option to sell the vehicle.|
Learn More: 6 Reasons to Consider a Car Loan From a Credit Union