Not sure if it’s better to buy or lease a car?
Both options have their pros and cons, and it can be challenging to determine which one is the best choice. In this article, we’ll explore the advantages and disadvantages of leasing vs. buying a car to help you make an informed decision.
Pros of Leasing a Car
Lower Monthly Payments
One of the primary advantages of leasing a car is the lower monthly payments. When you lease a car, you’re essentially renting it for a predetermined period, usually two to three years. According to Edmunds, the average monthly lease payment for a new car in the United States was $455 in 2020, while the average monthly loan payment for a new car was $568. (source)
This means that leasing a car can be a more affordable option in terms of monthly payments.
Lower Down Payment
Another benefit of leasing a car is that you don’t need to make a large down payment. While some leases may require a small down payment, it’s typically much less than the down payment required when buying a car. This can make it easier to afford a new car, especially if you don’t have a lot of cash on hand.
Most leases come with warranty coverage, which means that any repairs or maintenance needed during the lease period are typically covered. This can help save money on unexpected repairs and give you peace of mind. If you’re someone who prefers not to worry about the cost of repairs, leasing a car may be the best option for you.
Cons of Leasing a Car
One of the biggest downsides of leasing a car is the mileage limits. Most leases come with restrictions on the number of miles you can drive during the lease period. According to U.S. News & World Report, the average mileage limit for a standard lease is 12,000 miles per year.
If you exceed the mileage limit, you’ll have to pay a per-mile penalty, which can add up quickly. This can be a significant disadvantage if you have a long commute or enjoy taking road trips. However, it’s a good thing to consider when thinking about whether to buy or lease a car.
Another disadvantage is that you don’t really own the vehicle. This also means you won’t build any equity in the car, and you won’t have anything to show for your payments at the end of the lease period. If you’re someone who wants to eventually own a car, leasing may not be the best option for you.
Fees and Penalties
Leasing a car often comes with additional fees and penalties, such as early termination fees, excess wear and tear fees, and disposition fees. These fees can add up and make leasing a car more expensive than buying one in the long run. You’ll need to be careful about meeting all of the lease terms to avoid these fees, which can be stressful for some drivers.
Pros of Buying a Car
One of the biggest advantages of buying a car is ownership. When you buy a car, you own it outright, which means you can customize it, modify it, and do whatever you want with it. According to a survey by Cox Automotive, 61% of car buyers said they value the ability to personalize and modify their vehicles. (source)
This can be a significant advantage if you’re interested in car customization.
You also have the option to sell it or trade it in whenever you want. If you’re someone who likes to personalize your car or have control over your vehicle, buying a car may be the best option for you.
No Mileage Limits
When you buy a car, there are no mileage limits. You can drive as much as you want without worrying about exceeding a predetermined limit or paying extra fees. This can be an advantage if you have a long commute or like to take road trips.
No Additional Fees
When you buy a car, there are no additional fees or penalties, aside from the upfront costs and the ongoing maintenance and repairs. This means you won’t have to worry about any unexpected fees, which can be a significant advantage if you’re looking for a car that fits within your budget.
When you buy a car, you’re building equity in the vehicle. This means that as you pay off your car loan, you own more and more of the car, and you’ll eventually have something to show for your payments. If you’re looking for a long-term investment, buying a car may be the better choice.
Cons of Buying a Car
Higher Upfront Costs
One of the biggest disadvantages of buying a car is the higher upfront costs. According to Experian, the average down payment for a new car in the United States was $4,734 in the first quarter of 2021. This can be a significant barrier for some people who are looking to buy a car. You’ll also have to pay for taxes, registration, and other fees, which can add up quickly.
Ongoing Maintenance and Repair Costs
Another disadvantage of buying a car is the ongoing maintenance and repair costs. According to a study by Consumer Reports, the average cost of maintenance and repairs for a new car in the first five years is $1,186 per year. This includes routine maintenance such as oil changes and tire rotations, as well as unexpected repairs.
Cars depreciate in value over time, which means that when you eventually sell your car, you may not get as much money for it as you originally paid. According to a study by Edmunds, the average new car loses 23.5% of its value in the first year. This means that if you buy a new car, you’ll lose a significant amount of its value in the first year alone.
Deciding Between Having to Buy or Lease a Car
In conclusion, the decision to lease or buy a car comes down to your personal preferences and financial situation. Leasing a car may be the better option if you’re looking for lower monthly payments and don’t want to worry about maintenance and repair costs. However, leasing comes with mileage limits and fees, and you won’t build any equity in the car.
Buying a car gives you ownership and the ability to customize and modify the vehicle, but it comes with higher upfront costs and ongoing maintenance and repair expenses. You’ll need to carefully consider all factors and determine which option is the best fit for your lifestyle and budget.