A new vehicle can be one of the biggest financial expenses you face, which is why you must explore your options before you make your final decision. When you break it down, there are really only two routes you can take: buy or lease. So the question is, which option better suits your lifestyle?
Truth is, there are advantages and disadvantages to both buying and leasing a vehicle. Therefore, the best choice for each person will differ depending on their unique circumstances. Start by reviewing some of the pros and cons for each option.
Advantages of Buying:
- You can modify your vehicle as you please.
- There are no mileage limitations or overage fees.
- You can sell your vehicle whenever you want.
- It is more economical over time.
- You may keep the vehicle for as long as you want.
Disadvantages of Buying:
- You are required to pay for maintenance costs once your warranty runs out.
- Your down payment will be much higher.
- Monthly payments are higher.
- You are responsible for selling the vehicle, or going through the trade-in process when you are ready for a new vehicle.
Advantages of Leasing:
- Lower monthly payments with a low – or no – down payment.
- You can drive a more luxurious vehicle for less money.
- There are no selling/trade-in hassles to worry about.
- You get a new model every two to four years.
- You pay less sales tax.
- You don’t pay for regular maintenance.
- The future value of the vehicle doesn’t affect you financially.
Disadvantages of Leasing:
- You don’t own the vehicle, even though you’re paying money towards it.
- Your mileage is limited, and if you go over, you face overage fees.
- It is expensive to terminate a lease – almost as expensive as finishing the lease.
- Leasing equals more money spent in the long run (because you never pay off the vehicle).
- Lease contracts can be confusing.
- Excessive wear-and-tear on your vehicle can translate to extra fees.
The most obvious, and maybe most exciting, difference between buying and leasing a vehicle is that when you lease, you get a new model every two to four years. Being able to update what you drive that frequently is certainly considered desirable by many. Then, when those years are up, you don’t have to deal with the hassle of selling your vehicle. Instead, you just swap with the dealership for a new model.
On the other hand, there is a significant advantage to owning the vehicle you drive, which is that simple fact that you indeed own it! Because it’s yours, you can modify it as you please and you don’t have to worry about any mileage restrictions or fees. If you're someone who likes to stick with the same car for quite a while, maybe even as long as it's still drivable, then that alone is likely enough of a reason to buy your next one.
Despite the allure of frequent upgrades, buying your vehicle may be a more economically sound decision in the long run. When you lease, you are only paying for the value of the vehicle while you drive it – versus owning the entire worth of a vehicle when you buy it. Now, cars aren't the best investment out there because their value depreciates over time, but buying can at least be considered an investment of some sort while leasing cannot. However, for those who have less money to put down and spend every month but need a vehicle as soon as possible, leasing can be a decent solution.
All of the information above may make the choice obvious for some people, but there can be complicated caveats. For example, if you are buying or leasing through the company you work for, you should consult with the accountant as the expensing between the two may differ in significant ways. Overall, if you are still on the fence, consider reaching out to a financial professional who can give you personalized advice.