Is it better to lease or buy a new
Ask most people and they'll probably tell you that car
buying is the way to go. And from a financial perspective, it's true, provided
you're willing to make higher monthly payments, pay off the loan in full and
keep the car for a few years. Leasing, on the other hand, can be a less
expensive option on a month-to-month basis. It's also good if you're someone
who likes to drive a new car every three or four years.
There isn't a clear-cut answer - each scenario has its own
set of pros and cons. We say that the decision to lease or buy usually comes
down to your lifestyle and how you prefer to pay for things.
For example, if you need an upscale car for business,
perhaps to entertain clients, leasing allows you to have a nicer car for less
money. It might also provide a good tax write-off. However, if you're someone
who tends to stick with the same car for years, the best choice would be to buy
a new or used car and keep it for as long as it is reliable. You'll enjoy a few
years without a car payment, which is the point of car buying. That's something
people often forget.
Ultimately, you can say good things about both buying and
leasing. Your choice might come down to personal tastes and priorities rather
than pure dollars and cents.
Since everyone's situation is different, here are the pros
and cons of leasing and the pros and cons of buying. Some of these points are
financial factors and others relate to your needs and lifestyle. Keep in mind
that there isn't always a perfect answer to the question of whether to lease or
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Should You Lease Your Vehicle?
You have lower monthly payments with a low or no
- down payment.
You can drive a better car for less money.
You have lower repair costs because you are
under the vehicle's included factory warranty.
You can more easily transition to a new car
every two or three years.
You don't have trade-in hassles at the end of
You pay less sales tax.
You don't own the car at the end of the lease
(although there is always the option to buy).
Your mileage is typically limited to 12,000
miles a year (you can purchase extra).
You may find lease contracts confusing and
filled with unfamiliar terminology.
You may find it costly to terminate a lease
early if you’re driving needs change.
Should You Buy Your Vehicle?
You can modify your car as you please.
You'll save money over the long term if you buy
You can drive as much as you like. There's no
excess mileage penalty.
You have more flexibility since you can sell the
car whenever you want.
You can use the car as a trade-in on the next car
You must pay a higher down payment to avoid
being upside down in the loan (owing more than the car is worth).
Your monthly car payments are higher than lease
You're responsible for repair costs once the
You face possible trade-in or selling hassles
when you decide to get your next car.
You'll have more of your cash tied up in a car,
which depreciates in value.
Briefly, leasing makes it easier to get more car for less
money. This is because you only pay for the use of the car for two or three
years, instead of paying for the vehicle itself. Buying, on the other hand,
frees you from the restrictions involved in leasing, such as mileage caps. The
car is yours to do with as you wish.
Ultimately, it's up to you to weigh the pros and cons,
determine your needs and decide which choice best suits your lifestyle
You're more likely to buy
- When you lease a car, you are typically capped at 15,000 miles a year. Additional mileage can cost you up to 35 cents per mile. And that can really add up.
- If you like to personalize a car, this investment can be lost on a leased car.
- If you like the idea of ownership, you are less likely to be happy with the lease option.
- If you like the feeling of accomplishment that paying off a large purchase brings and should consider that when you lease a car, the payment ends only when you return the car.
- If the car you presently own is over 3 years old you are more likely a buyer. While not always true, you can usually drive for less if you're willing to buy and drive for at least 3 years.
- If you don't mind doing your own car repairs, you probably don't mind driving a car after the warranty expires.
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You're more likely to lease
- Lease arrangements usually involve a 15,000 miles-per-year cap and charge for extra miles. If you drive very little, you may be a candidate for a luxury lease.
- When you negotiate a 24 or 36-month lease, you can be sure you'll always be driving a new vehicle.
- Although you need to maintain and repair your leased vehicle just as you would an owned vehicle, because you typically lease for 2 to 3 years, the car is normally under warranty.
- Many people prefer to drive a vehicle that is priced above their means and leasing provides the solution.
- If you don't mind not owning the car, you are free to enjoy the benefits of leasing like low monthly payments and a low down payment.
- If you own the company, and you use your car for business, check with your tax advisor. You may be able to deduct your auto expenses, including your monthly lease payment. And if the company you work for gives you a monthly car allowance, you may want to lease since you'll be able to drive a nicer car for a lower monthly payment.
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