Buying vs. Leasing Your Next Ride: Which Option Makes Sense?
If you’re in the market for a new ride, you have plenty to think about. Car or truck? New or used? Cash payment or financing? Dealer or private party? The options are virtually endless. And while it can be overwhelming to consider additional options, it would be unwise to proceed too far without also thinking about whether you want to buy or lease your next vehicle.
Buying vs. Leasing
For some reason, you don’t hear much about leasing cars. Most people are comfortable with leasing an apartment or home, yet their immediate inclination is to buy a vehicle. In many cases, this makes complete sense. However, there are also times when leasing is the superior option.
If you’re in the market for your next vehicle, don’t automatically assume that buying is the only way to go. It very well might be the best option for you – and it is for millions of people – but it would be unwise to totally ignore the possibility of leasing. In this article, we’re going to dissect some of the pros and cons for both buying and leasing so that you can get a better idea of which opportunity is best in your situation.
Pros of Buying
Most people end up buying a new or used vehicle because of the many advantages this type of transaction affords. Here are the top reasons to consider buying:
- Ownership: The most obvious pro of buying is that you get ownership of a vehicle. Not only does it feel good to own something, but this also increases your personal net worth through additional equity. You can do whatever you want with the vehicle and choose to sell or trade whenever you see fit.
- Flexibility: Buying comes with a lot of flexibility. In addition to the flexibility mentioned in the previous point, buying also enables car owners to make cosmetic changes and additions to the vehicle. Want to add an accessory? You can add as many as you want and nobody can tell you otherwise.
- Resale: Ultimately, you get the advantage of resale value when you decide you’re done with the vehicle. While the resale value will be a fraction of what you paid on the front end, it’s nice to know that you can recoup some of your expenses and use that money to buy your next vehicle.
Cons of Buying
However, for every pro, you could argue there’s also a con. Check out these disadvantages of buying:
- Down payment: The biggest disadvantage of buying is that it’s costly. If you pay in cash, you obviously have to fork over the entire amount. But even if you finance the vehicle, you’ll need to pay a hefty down payment, taxes, registration, dealer fees, and other add-on expenses.
- High monthly payments: Generally speaking, monthly loan payments are higher than lease payments. This is because you’re paying off the entire purchase price of the vehicle, not just the vehicle’s depreciation during a lease term. In some cases, the difference will be nominal, but in others, it can be a few hundred dollars per month.
- Interest payments: Finally, if you finance your purchase, you’ll have to pay interest over the life of the loan. Depending on the length of the loan, amount, and rate, this can easily add up to a few thousand dollars.
Pros of Leasing
Now let’s shift our attention to leasing. While it certainly doesn’t get the same amount of attention as buying, leasing comes with a number of pros. They include:
- Low upfront cost: The beauty of leasing is that the upfront cost is extremely low (when compared to buying). You’ll typically be asked to write a check for the first month’s payment, a refundable security deposit, and other fees. It’s not cheap, but it’s certainly not as expensive as buying.
- Low monthly payments: As mentioned, lease payments are generally much lower than loan payments. (Use this calculator to get an idea of the difference). With a few hundred extra dollars in your bank account each month, your budget will be able to breathe a little more.
- Ability to walk away: If you’re tired of the vehicle at the end of your lease, you can walk away. People who love driving different vehicles every few years find this aspect of leasing very desirable.
Cons of Leasing
If you stopped with the pros, everyone would be leasing their vehicles. As you probably guessed, there are also some cons. Here are the ones you should know about:
- No ownership: The biggest disadvantage of leasing is that you aren’t building any equity. Your monthly payments simply allow you to use the vehicle. You won’t be able to recoup any of these payments with a future resale.
- Mileage limitations: Most leases will actually limit the number of miles you can drive. This is typically between 12,000-15,000 miles per year. If you drive a lot, you could easily surpass this threshold. As a result, you’d have to pay additional charges.
- Inability to customize: Finally, there’s no ability to customize your vehicle if you lease it. Everything must be the same at the end of the lease, which means there’s very little opportunity to make the car feel like your own. For some people, this is a big deal. For others, it doesn’t really matter.
Let compare.com Help You Decide
As someone who’s in the market for their next vehicle, it’s important that you weigh your options. While buying often makes more sense, leasing is sort of a hidden gem that few people ever give consideration. Your choice is highly personal and will depend on a lot of factors, but don’t be afraid of spending even more time analyzing your options.
At compare.com, we believe every consumer needs to carefully consider a number of different factors when it comes to the buying or leasing process. Feel free to browse our site, check out our many helpful car guides, and utilize our auto insurance comparison quote tool to find the best rate and coverage for your lifestyle.