It’s that time when you’re seriously considering getting a new car to replace your aging one. Some of your friends have suggested buying and keeping it for the long term, while others recommend leasing one. Your leasing friend gets a fresh new car every three years, but your buying friend loves holding onto his car for years, and it still looks great.
When it comes to getting a new car, one of the first decisions you'll face is whether to lease or buy, and it’s not a simple decision. Each option has its own set of advantages, and the right choice depends largely on your personal circumstances, financial situation, and driving habits. Here's a comprehensive look at the benefits of leasing versus buying a new car to help you make an informed decision.
Benefits of Leasing a New Car
Lower Monthly Payments
Leasing typically comes with lower monthly payments compared to financing a car purchase. This is because you’re only paying for the vehicle's depreciation during the lease term, rather than the entire value of the car. For those on a tight budget or looking to drive a higher-end model without breaking the bank, leasing can be a more affordable option.
Driving a New Car More Often
Leasing allows you to drive a new car every few years. At the end of a lease term, usually two to three years, you can simply return the car and lease another new one. This is perfect for those who enjoy the latest features, technologies, and safety advancements in newer models.
Lower Repair Costs
Since most leases last only as long as the manufacturer’s warranty, major repairs are usually covered. This means you’re less likely to encounter significant out-of-pocket expenses for maintenance, providing peace of mind and predictable costs throughout the lease term.
(photo: Lexus)No Need to Worry About Resale Value
One of the biggest concerns of car ownership is the depreciation and resale value of the vehicle. Some cars can drop as much as 20 percent in the first year of ownership. It’s not the case with a leased vehicle. There is no depreciation, in fact. At the end of the lease, you can simply return the car without worrying about selling it or negotiating a trade-in value. You even have the option of buying it outright, and that’s where the depreciation comes in because they have to sell it to you at a lower cost than the price of a new one.
Lower Upfront Costs
Leases often require little to no down payment, which can be advantageous if you prefer to keep your cash available for other purposes. Of course, you should read the fine print before you agree to lease because some manufacturers do require a small down payment. Taxes and fees are also typically lower with a lease, reducing the initial cost of getting into a new vehicle.
Benefits of Buying a New Car
Ownership and Asset Value
When you buy a car, it's yours. Granted, you most likely will need to take out a loan since the average new car price is about $50,000 these days. But it also means that you own the car and don’t have to return it at the end of a lease. This means you have the freedom to keep it for as long as you like, make modifications, or sell it at any time. As the loan is paid off, you gain equity in the vehicle, which can be a financial asset. Granted, it’s a depreciating asset, but it’s one you own, nonetheless.
No Mileage Restrictions
If you like to drive a lot, or your commute requires it, then a lease might not be for you. Virtually all vehicle leases come with mileage limits, typically between 10,000 to 15,000 miles per year. Exceeding these limits can result in high fees, so it serves you best to buy versus lease if you drive a lot. Buying, on the other hand, allows you to drive as much as you want without worrying about penalties or restrictions.
Long-Term Cost Efficiency
While buying a car usually involves higher monthly payments initially, once the loan is paid off, you’re left with no monthly car payment, just the cost of maintenance and insurance. Over time, owning a car can be more cost-effective than leasing, especially if you plan to keep the car for many years. Leasing is, essentially, a long-term rental. This means that when you give the car back, you get nothing for your money. You’ve pretty much paid every month to rent the car, and then you have to give it back.
Flexibility to Customize
Car ownership gives you the freedom to customize your car, as long as you don’t make any mechanical changes that might void the warranty while it’s effective. But you can add accessories, change the wheels, upgrade a sound system, or even repaint the car if you want. You can’t make any changes to a leased vehicle. Leased vehicles must be returned in their original condition to the dealership where you signed the lease, limiting your ability to personalize your ride.
Key Factors to Help You Decide
● Driving Habits: If you drive a lot, buying may be a better option due to lease mileage restrictions. Perform a calculation of approximately how much you drive each year and include commuting to and from work, errands, road trips, etc.
● Budget: Consider the upfront and monthly costs of each option to see which fits better within your financial plans. If you want to keep costs low and you don’t mind switching vehicles every 2-3 years, leasing might be best.
● Future Needs: Think about how long you plan to keep the vehicle and whether you value the latest features in newer cars. If you’d like to have a car payment for a short time, avoid leasing and consider buying.
● Maintenance Preferences: Lease for lower repair worries and costs, buy if you're comfortable managing long-term maintenance. If you hate getting your car repaired at your cost, consider a lease.
The decision to lease or buy a new car depends on your financial situation, driving habits, and personal preferences. Leasing offers the allure of lower payments, driving a new car more frequently, and reduced maintenance costs. On the other hand, buying provides the benefits of ownership, long-term cost savings, and the freedom to drive as much as you want. Carefully evaluating these factors will help you make the choice that best aligns with your lifestyle and financial goals.
