You need a new car. Perhaps you’ve heard that leasing is less expensive than buying. Perhaps you’ve heard that buying is better in the long run. The decision on whether you should buy or lease should be based on your individual situation or needs.
To help, we’ve put together some advantages and disadvantages of buying versus leasing.
If you’re unsure which option is right for you, our friends at Balance are also available to help you make the best financial decision by giving advice free of charge. Give them a call at 888.456.2227 or chat with them online.
Advantages of Leasing
- Lower Monthly Payment
When leasing, you only make payments based on the depreciation of your vehicle during the leasing period. Because of this, your monthly payments are likely lower than if you bought the car outright.
- Drive a Brand New Car Every Few Years
Leasing is a great option if you like to drive new cars. Lease terms are generally around three years so once that time is up you can trade it in for a newer model.
- Covered Under Warranty
Leased cars are usually covered under warranty. You are, however, responsible for maintenance, which you’ll likely be required to keep up with.
- Purchase Options
If you like your car at the end of your lease agreement, many times you’ll have the option to purchase the car.
Disadvantages of Leasing
- Mileage Restrictions
Lease terms generally define how many miles you’ll be able to drive the car during that time. You may be charged per-mile fees, should you exceed that limit.
- Payments do not Equal Equity
Much like renting a home versus buying, the monthly payments you make are not building equity, meaning you are not moving closer to outright owning the car.
- Fees Add up
Conditions will be set with your lease term. Fees may apply for damages, wear and tear or early termination. If your financial situation changes, you may not be able to get out of the lease without paying hefty penalties.
Advantages of Buying
- Ownership is Yours
When you purchase a car, you’re either paying cash up front or financing it. Either way, you will eventually have that car paid off and have full ownership.
When you own your car, you’re able to customize it to your taste. This may be changing hubcaps, a new paint job or adding accessories like a ski rack. Often times these changes are prohibited with a lease.
- Sell at Any Time
Unlike a lease, you are not bound by a contract. That means you can sell it at any time.
Disadvantages of Buying
- Down Payments can be Large
If you are financing your car, you will likely be required to put a certain amount of money down in order to drive the car off the lot.
- Higher Monthly Payments
Because you are working towards owning the car, your monthly payments will likely be higher than if you lease.
- Maintenance Costs
Once the warranty on a new car expires, you are responsible for all maintenance and repair costs. This could be costly over time.
If you are thinking about purchasing a new or used vehicle, use our Auto Loan Calculator within Online Banking or the Mobile App. You can adjust price and down payment to see what your monthly payments could be.