You spent years driving around in a car that kept you guessing whether you would arrive at your destination. After careful consideration, you decide to look at other vehicles. However, now comes the debate: leasing vs. buying a car. By learning the pros and cons of each, you’ll have a much better idea of which option would serve you best. You’ll also need to know how to get a loan for each one.
Pros of Leasing vs. Buying a Car
Advantages of Buying
When purchasing, you can look at new, used and certified pre-owned vehicles. Also, you have unlimited options as to the year, make, model and trim level. With so much versatility, you will have no problem finding a car that fits your budget and driving needs.
Another advantage of buying a vehicle is that it belongs to you once paid in full. At that point, you have the freedom to do whatever you want, such as painting it, changing the rims, driving it for years, trading it in or selling it. In other words, owning a vehicle comes without restrictions.
Something else to consider is that with a purchase, there aren’t limitations on the miles you can drive within any given year. You can use your newly bought vehicle for work and pleasure. You also can take as many long-distance road trips as you want without worrying about the dealer penalizing you.
Advantages of Leasing
One advantage of leasing is that at the end of the contract, usually two to three years, you can swap out the car you currently drive for a brand-new one. For instance, if you lease a 2019 vehicle and your contract expires in 2022, at that time, you can turn in the older car for a 2022 model. Because of that, you always have a vehicle with the most advanced infotainment, safety, and technology features.
Also, a dealership seldom asks for a down payment on a lease. That means even if you have an excellent job but a limited cash flow, you can still lease a new car. The payment amount is different, as well. When leasing, you pay only for the depreciated value of the vehicle instead of the entire thing. As a result, you will spend less each month in payments, making this a more affordable choice for many people.
Cons of Leasing Vs. Buying a Car
Along with all the benefits outlined for leasing vs. buying a car, there are some negative aspects to consider for both.
Disadvantages of Buying
If you buy a car, all maintenance and repairs fall back on you. As you can imagine, a blown head gasket, broken transmission or damaged catalytic converter will cost you a lot of money. The only reprieve is if you buy a car still under the original manufacturer’s warranty or you opt to purchase an extended bumper-to-bumper warranty. With leasing, the manufacturer or dealership deals with repairs and often maintenance.
Another disadvantage of buying: the minute you drive off the lot, the vehicle depreciates in value. Even if you get an incredible deal, within the first month of owning your car, it’ll lose at least 10% of its value, if not more. Then, the longer you drive the vehicle, the more the value goes down. With leasing, you never have to worry about this.
Disadvantages of Leasing
Although leasing a car comes with tremendous advantages, you still need to look at some of the not-so-great things about taking this route. Most importantly, you need to have excellent credit to qualify for a lease. Since the dealership owns the vehicle, it wants someone responsible behind the wheel. Therefore, if you think leasing is a better option, spend time on improving your FICO score. When buying, most dealers have special financing for people with less-than-perfect credit.
As mentioned in the pros of leasing vs. buying a car, when you lease a vehicle, you have a limit on the number of miles you can drive within a 12-month period. That does not mean you cannot drive further, but if you do, expect the dealer to tack on a penalty at the end of your lease agreement. If you do a lot of driving, buying is a better choice.
When leasing a car, you do not own it. A lot of people who choose to lease like this, while others don’t. After all, you spend several years making payments on a vehicle that is not even yours. If this bothers you, then you should consider purchasing instead.
Helpful Tips for Leasing vs. Buying a Car
Whether you decide to lease a car or buy one, there are some important tips to consider.
Always do business with a reputable dealer, especially one with an excellent in-house finance department staffed by experienced specialists. In both cases, you need to go through a financing process. Therefore, you want someone with expertise to help with both leasing and buying. When buying, an expert should connect with several top lenders to find you a loan with excellent terms and low interest. For leasing, this same individual should have extensive knowledge to streamline the process and ensure you get the best deal possible.
Make sure you factor in your long-term goals when deciding between leasing vs. buying a car. As an example, if you want to gift your teenage son or daughter with a vehicle in a few years, you could do that if you own the car. That’s not an option with a lease.
Again, if you do a significant amount of driving, leasing is not a good idea. Depending on how many miles you go over the allotted amount, you could end up with a hefty penalty.
Whether buying or leasing, bring your credit score up as much as possible. Not only will an excellent FICO score allow you to lease, but if you prefer to buy, it’ll help you secure a loan at the lowest interest available.