When you’re in the market for a new car, one of the first decisions you’ll need to make is whether you want to lease or buy. Each option has its advantages and disadvantages, so it’s important to choose the one that’s right for you.
Differences Between Leasing and Buying a Car
When you lease a car, you’re agreeing to make monthly payments to use the car for a set period of time. The standard time frame for a car lease is three years. You won’t own the car at any point, so you’ll return it to the dealer after your lease is up.
Lease agreements have annual mileage limits, which are usually 12,000 miles. If you go over your mileage limit, the dealer will charge you a per-mile overage charge. At the end of the lease, you’ll have the option of purchasing the car or returning it.
When you buy a car, you can either pay the entire price upfront or get a loan. There aren’t any mileage limits since you’ll be keeping the car.
Why Leasing Makes Sense
The benefits of buying a car are obvious. You’ll own the car and you can sell it when it’s paid off and you don’t want it anymore. You don’t need to deal with any mileage limits, which is important if you drive often. One major reason people choose buying a car over leasing it is because when you lease, you have nothing after your lease is up. At least with a car payment, you’ll have something of value.
But leasing offers quite a few benefits of its own. First and foremost, you pay less when you lease, both in terms of your down payment and your monthly payments. That’s because when you lease, you’re only paying for the depreciation on the car, or how much of its value you’re going to lose while you have it. When you buy a car, you’re paying for its entire value. With many lease agreements, you won’t even need to put any money down.
By leasing a car, you’re able to drive a new car every couple years. If you like having a car with the latest features, leasing is a much better option. You can get a new car at an affordable monthly payment, drive it for three years, and then return it and lease another new car.
Maintenance costs are much lower when you lease a car instead of buying it. With a leased car, you’re only covering basic maintenance, such as oil changes. Since the car is relatively new, it’s unlikely to have major mechanical issues. Even if it does, the warranty will cover repairs. You’ll also have a warranty if you buy a new car, but after it ends, you’ll be stuck covering any repairs out of pocket. Leasing a car is less of a hassle in that regard.
You also don’t need to figure out what to do with your car at the end of your lease. Your only decision is if you want to buy it or lease something else. While you end up with something of value when you buy a car, it can also be an inconvenience. You could end up paying for expensive repairs as your car gets older. Otherwise, you’ll need to sell it or trade it in, both of which take time.
Deciding What’s Right for You
Leasing can be an excellent option if it fits your situation. It tends to work best for those who want to consistently drive newer cars and don’t drive excessively, although you can get a lease agreement with a higher mileage allowance. For the average driver, 12,000 miles is more than sufficient.
Buying a car can also be a good option. It gives you more flexibility, and you’ll own the car. However, it’s best to look at some lease options, as well. You may find that you can save quite a bit of money by leasing or drive a much nicer car for the money you spend.