Buying vs. Leasing a Car
When you decide to get a new car, the process can be overwhelming. There are many decisions you have to make. One of the most important decisions is whether you want to buy the car or to lease it. Maybe you’ve heard that leasing is less expensive than buying. Maybe you’ve heard that buying is better in the long run. But what direction should you go? The decision on whether you should buy, or lease should be based on your individual needs. To help decide, we’ve put together some advantages and disadvantages of buying versus leasing.
If you’re unsure which option is right for you, our certified Financial Coaches are available to help you make the best financial decision.
Advantages of Leasing
Lower Monthly Payments- 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.
Greater Purchasing Options- If you like your car at the end of your lease agreement, many times you’ll have the option to purchase the car.
Financial Savings- Typically, leasing requires little or even zero down payment. There may even be zero upfront sales tax charges. And if you’re a business owner, there could be additional financial advantages to leasing a 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 feels, 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 team. 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’ll eventually have the car paid off and have full ownership.
Customization Options- 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 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.
When you’re a member of Rivermark, we want to be sure you’re making the best, most informed financial decisions. That’s why we offer plenty of financial resources to help you decide. And we also have great auto loan options available. If you are thinking about purchasing a new or used vehicle, reach out to our Financial Wellness Coaches to get started.