Leasing a car usually gives you lower payments and doesn’t require as much money upfront. However, there are typically restrictions on mileage and higher insurance costs. On the other hand, buying a car might require more upfront money and higher monthly payments, but it gives you more control over the vehicle and builds equity.
Overview of Leasing a Car
Leasing a car means that you’re essentially paying to use it for a few years and then returning the vehicle at the end of the term. This usually gives you lower monthly payments and may not require any money upfront. If it does require a down payment, it’s important to remember that you won’t get that down payment back at the end of the term. Leasing vs. buying a car also comes with restrictions on how you can use the car. There is usually a mileage limit, and you won’t be able to customize the car.
Overview of Buying a Car
When you buy a car, you might pay more upfront vs. leasing a car, but you’ll own the vehicle at the end of the finance term. If you put a down payment toward the car, it lowers your monthly payments and, ultimately, adds to the value of your car. Financing to buy a car makes sense if you want to own the car for a while. Insurance costs associated with buying a car are typically lower than if you lease a car.
When Leasing vs. Buying a Car Makes Sense
Leasing vs. buying a car makes sense if you prefer to get a new car every two to four years. Leasing also makes sense if you want to have a higher trim with all the options. It will cost less to lease a vehicle like this vs. if you wanted to buy it. However, the costs for leasing a car can add up pretty quickly. You’ll still need to pay taxes and licensing fees, plus you may still have to make a down payment. When you turn the lease in, you might be charged for any excessive damage or wear to the vehicle as well.
When Buying a Car Makes Sense
Buying a car makes sense when you want to own the car for a longer term and do whatever you want with it. There are no mileage or customization restrictions while you’re paying for the car. However, the cost to buy a car is generally a lot more than leasing. The monthly payments can end up around the same, but the finance term is often longer. You can save money by looking at certified pre-owned cars. For example, the average amount financed for a new car is over $41,000, but it’s around $26,000 for a used car.
Bottom Line on Leasing vs. Buying a Car
Deciding whether you should lease or buy a car depends on your financial situation and driving habits. It may also depend on if you’re willing to settle for a lower trim and fewer options to fit your budget. If you want to pay less upfront and don’t mind turning your car in every few years, then leasing might make sense. However, it’s important to remember that leasing comes with restrictions on how you use the car as well.
If you want to keep your car for a long time, customize it as you wish, and don’t mind the higher financial commitment, then buying a car probably makes the most sense for your situation.
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