Is it better to lease or buy a car?
If you're in the market for a new car, there are a lot of decisions to make: Hybrid or electric? Sedan or SUV? But most important, you need to decide if you want to buy or lease your vehicle. But how do you choose between leasing or buying?
If you buy this usually means a higher monthly cost, but at the end you own the asset.
If you lease, often this comes with lower monthly payments but at the end of the lease if you still need a car, you are into another lease and continually paying for a newer car.
3 things to consider when buying a car
There are many pros and cons to both, and the right decision for one person may not make sense to another. Here are three things to consider when determining if you should buy or lease a car.
#1. First, figure out how much you can afford to spend each month. If you need the cheapest option available, monthly lease payments are generally more affordable than auto loan payments. That's because you aren't paying off the vehicle's full purchase price.
The downside to this is that even though you are paying less, there's no hope of recouping your money years down the road by reselling the car because it doesn't belong to you – leasing is essentially renting the car from the car dealership. If you buy, on the other hand, once you resell the vehicle and get some money back, you will likely have spent less money overall. Also If you are like me and like to keep you car for a long time (I keep my cars for 10 years) buying a car
But if the smallest monthly payment is your main concern, leasing is likely the way to go.
#2. Next, determine what you'll be using the car for and how many miles you anticipate putting on its odometer. Leased cars come with mileage restrictions, often an average of 1,000 mile/KMs per month. Going over this amount could cost you surcharges that can be as much as 20 cents per extra mile/KM.
If you plan on driving more than 250 miles/KMs per week — which would put you on pace to surpass 12,000 miles/KMs in a year — do the math and see if it will still save you money over buying.
#3. Lastly, decide how important it is to you to drive the latest model of car. If you want to a new car every three to four years, leasing may your best bet. But if you don't mind driving the same car for six or eight years, it may make sense to buy.
Summary
Both leasing and financing/buying a car will get you a vehicle with a monthly payment. The difference is with buying the car, you own the vehicle. With leasing, you’re renting it from the dealership and will have to return it at the end of the term – or buy it outright.
There is no one-size fits all for everyone, so be sure to do your homework on the financial details of the deal, review your spending plan and enjoy the car!
Let me know, do you lease or buy your vehicles?