Hunting for a car can be a little stressful. You have to decide if you want to buy a car or lease one. The following are a few pros and cons of both options, which should help you make an informed decision.

Get Acquainted With the Purchasing Option


One obvious benefit is that purchasing a car means you will own the car. Well, this will happen after you finish paying off the loan and receive the title, but the end goal is full ownership.

Mileage Freedom

Another benefit of purchasing a car is you have the freedom to drive whenever you want. You do not have to worry about caps on miles that can be driven each month. Those who love to travel or live in rural areas will love having this freedom.

Ownership Freedom

Buying a car and receiving the title gives you the opportunity to take out equity on your vehicle, or you can simply sell your car. The car is completely yours and can be seen as an illiquid asset.

There are some drawbacks in purchasing a car like the following:


Most new cars depreciate in value, so it will end up being worth a lot less. This means you will not be able to recuperate your full investment.

Negative Equity

Due to depreciation, a car loan is more than what the car is worth. This issue is sometimes called negative equity. If you want to trade or sell your vehicle, you will be responsible for coming up with the difference between what the car sells for and the remaining loan amount.

Down Payment

People who finance a vehicle usually have to leave a down payment. It can be between 10 to 20 percent of the loan you are requesting.

Loan Terms

The payments are relatively large and can be extended for years for those who want smaller payments. Some people end up paying car loans for seven years or more, making this feel like a trap.

Say Hello to Leasing

Many people are choosing to lease a car instead of buying one for many of the reasons below:

Difference in Financing

Keep in mind that you are only paying for the depreciation that occurs as you lease the car, which is usually two to three years. This means the monthly lease payments are going to be drastically lower.

The Residual Saving

A car leaser’s payments will be based on the car’s predetermine residual value, which is usually broken down into percentages. It usually ends up being around half of the total price of the car.

Zero Down Payment

You can give a down payment when you lease a car, and it will help make the payments lower, but here is a little secret: you do not have to.

Under Warranty

Your leased car is usually under warranty, which means major repairs are not something you have to worry about. You do need to keep up with regular maintenance because failing to do so could result in additional fees when the term is over

The following are a few negatives involved with leasing:

Limited Miles

Yes, there is a limit on the number of miles you are allowed to drive each month, and failing to adhere to these limits will result in additional fees.

No Alterations

You are expected to return the car in its original condition. Any big changes to the car will result in additional costs.

Now, you know a little more about purchasing and leasing a vehicle. Clearly, no option is perfect, but it seems that leasing is the smarter choice for those who want to save money and drive the latest model.

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