When you go car shopping, you’ll eventually be faced with the choice between leasing and buying a car. Which should you choose?
How you pay for your car has upsides and downsides. If you like to have the latest vehicle with low mileage and don’t need to drive over 12,000 miles per year, a lease program might be best for you. On the other hand, if you don’t want to deal with any restrictions and want to customize your ride, you’ll want to consider buying your car.
Let’s take a look at some of the benefits of leasing vs. buying a car.
The Upside
A car lease can be an appealing way to pay to drive a vehicle. With lease programs, you get to drive a brand-new car, which means you get the benefits of the warranty program and the most trouble-free years of driving. Payments cover the depreciation and expected wear-and-tear on the vehicle during the few years you drive. Once the lease has ended, you can return the vehicle and enter into a new lease program with another new model.
Some additional major advantages to a lease program are:
- Driving the car during its most trouble-free years
- Always driving late-model vehicles covered by the automaker’s new-car warranty
- Lease program could include free oil changes and other scheduled maintenance
- Can afford to drive a higher-priced, better-equipped car than if you purchased the vehicle
- Most advanced tech and safety features should be part of your new car
- Trade-in value fluctuation isn’t a factor with leased vehicles
- Tax advantages for business owners using the leased car for business
- At lease end, you can return the vehicle to the dealership
Can loans and leases be compared?
Some of the most significant differences between leasing and buying a car are items that can’t be compared directly. Some automakers offer extra rebates and incentives for lease programs that won’t be available for customers looking to purchase their vehicles. Automakers do this because they know the leased vehicle will be returned or financed at the end of the lease term, which gives them a second chance of benefiting financially from the vehicle.
Currently, many car loans last at least six years, which is at last two to three years longer than lease programs. The leased car is only paid for during the first three years while the purchaser still has three years to go on the original car when the lessee is ready to look for another car or pay the buyout price of the leased vehicle.
Leasing may be the way to go for EVs
Electric vehicles haven’t proven themselves to be durable and reliable because the market is still extremely new. This lack of proof means shoppers could benefit more when leasing an electric vehicle than owning it. Many automakers apply 8-year warranties to their EVs, which is much longer than a three-year lease program, leaving at least five years of warranty for the next owner.
Additionally, some lease programs qualify for the $7,500 federal tax credit for EVs rather than when these vehicles are purchased. Leases qualify for this full program without meeting any of the additional restrictive requirements that purchasers must face when buying an electric car. Factors such as purchase price and buyer’s income aren’t considered for lease programs.
The Downside
When considering leasing vs. buying a car, leasing isn’t all a bed of roses. There are some disadvantages to lease programs, including:
- Leasing can cost more than a loan in the long run
- Monthly payments never end if you lease one car after another
- Leases are restrictive, limiting miles allowed
- Going over the mileage limit costs more, averaging 10 to 50 cents per mile
- Maintenance is required or wear-and-tear charges will be added
- Terminating a lease early can cost thousands of dollars
- The car must remain in factory condition; no customizing allowed
- Still must pay for consumable items such as tires and brakes
- Will be faced with a fee when turning in the vehicle at the end of the lease
Should you lease or should you buy?
When going car shopping, you’ve got to consider your best options between leasing and buying a car. If you have good credit, you can probably secure a lease, but you won’t have this option if your credit is poor. There are many advantages and disadvantages to each type of financing, but if you like to drive a new car every few years and want lower payments than what purchase deals offer, then leasing could be the best choice for you.
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