When it comes time to get a new vehicle, you have the choice or buying or leasing a new car. While both offer a great solution when it’s time to upgrade your ride, there are several deciding factors that indicate which is the best solution for your needs.
Any major purchase poses financial implications, but there are several choices beyond this that need to be made when deciding if buying or leasing a car is the best move for you.
What is the Difference Between Buying and Leasing a Vehicle?
Before you can decide which new car scenario is best for your situation, it is important to know the difference between buying and leasing a vehicle.
Buying a Car
Buying a car is fairly simple and can be purchased via a private sale, at an auction, or at a car dealership. You have the option to pay cash for the vehicle or have it financed. Over 80% of auto purchases in the U.S. are financed through a bank or credit union with the current average new car loan being around $35k with a monthly payment of about $575.
Leasing a Car
When you lease a car, you are essentially renting it for a specific amount of time. While you don’t actually ever own the vehicle, you are also not responsible for most repairs and can simply turn it back it when the lease term is over without having to worry about selling the vehicle. The average lease term is 36 months with an average monthly payment of $460.
Pros and Cons of Buying and Leasing a Car
When trying to decide if buying or leasing a car is right for you, consider these pros and cons of each.
Pros of Buying a Car
- Each monthly payment builds equity in the vehicle
- You eventually own the vehicle outright
- Drive unlimited miles with no penalty
- Can be sold at any time
Cons of Buying a Car
- Rapid depreciation
- Higher monthly payments than leasing
- Excessive interest rates
- Responsible for all maintenance/repairs after warranty expires
Pros of Leasing a Car
- Lower monthly payments
- Always have a new vehicle to drive
- Not responsible for repairs
- Approval with less than perfect credit
Cons of Leasing a Car
- No equity in the vehicle
- Mileage limits apply
- May be charged for damage to vehicle
- Leases can be difficult to get out of
Both new car scenarios have a definite set of pros and cons and are great options when it’s time for a new vehicle. Savvy consumers can assess the facts and determine the best way to obtain a new vehicle. There is no set answer for everyone, and the pros and cons should be evaluated to determine which option best suits your needs and finances and delivers a dependable car you can afford to drive.