Leasing vs. Buying

When considering a new car purchase, the sticker price tells only a part of the story. The total cost of ownership is much higher when financing and maintenance are factored in. That often triggers the debate over leasing versus buying (with financing).

While both options have their merits, they also have their own pitfalls. To decide which is right for you, carefully consider your unique situation. There is no right or wrong answer, except that you should do what's best for you.

Ask yourself a few key questions before you decide and you may just save yourself some money and frustration.

Are you a New Car Snob?

Some people simply don’t like driving used cars or cars not under warranty – and there’s nothing wrong with that; except that it could get very expensive financing a new car every three or four years. When you lease a car, you're only financing the car for the period you are using it, which translates into lower monthly payments. Just make sure your lease period doesn’t outlast the car’s warranty.

Conversely, if you're willing to keep the vehicle for more than four or five years and are willing to make higher monthly payments knowing you will own your vehicle outright, loan financing may be the better way to go.

Are you making a Down Payment?

When buying a car, it helps to make the biggest down payment possible. If you don’t, you might end up owing more on the car than it is worth. The size of your down payment also dictates the size of your monthly payment.

If you can’t come up with a down payment and you still want to minimize your monthly payment, then leasing might be the way to go. Just keep in mind that you will always be making monthly payments as long as you use this method.

Do You Drive More Than 15k Miles a Year?

If between commuting and personal use you drive more than 15,000 miles a year, you’re probably better off purchasing your car. Leases have mileage limits ranging from 10,000 to 15,000 miles – the lower the limit, the lower your monthly payment. However, if you exceed the mileage limit you will pay for the excess miles, which can be very expensive.

If you think you'll drive more than 15,000 miles per year, you can purchase excess mileage up front, which is less expensive. Just be minfdul of your driving habits before leasing and be sure to carefully review the lease terms for a clear understanding of all the charges at the beginning and end of the lease.

Choosing What's Right For You

You should probably lease if:
You want a new vehicle every 2 to 3 years
You want lower monthly payments
You want a vehicle that is always under warranty
You drive fewer than 15,000 miles a year

You should probably buy if:
You are willing to keep the vehicle for more than 5 years
You want to own your vehicle outright someday and are comfortable with slightly higher monthly payments
You're comfortable with the risk of non-warranty repairs
You want the freedom to sell your car at any time
You drive more than 15,000 miles a year

Want to crunch some numbers? Try this Lease vs. Buy calculator to compare your options.

LAUNCH CALCULATOR

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