1. Initial and Ongoing Costs
Both buying and leasing involve making an initial payment, paying a small number of taxes and administrative fees, and making arrangements for monthly payments in the future. The different between the two comes from the size of the payments, which generally favor leasing.
People who lease their vehicle usually need to start by making the first month’s payment and providing a refundable security deposit. People who buy their car need to make a large down payment, which usually costs significantly more than the monthly fee for the lease. Buyers can pay the rest of the cost of the car on the spot, but most opt for a loan, which means both systems usually involve a monthly car payment. The cost of interest for the loan means that the payments are often of comparable size, or even larger than the lease payments.
That makes leasing the stronger option for people who want low costs. People who lease pay significantly less up front than buyers, and their monthly payments tend to be lower for the duration of the lease.
Leases only last for a few years, which means that people who lease aren’t locked into using a single car for a long period. They have the option of keeping the car by buying it when the lease ends, but they can also start leasing a new vehicle if they want to switch. That means that people who lease have the flexibility to get new cars that match their lifestyle as it changes without losing a large part of their investment like a buyer would.
3. Terms and Conditions
Leased cars do come with more terms and conditions than purchased cars, but they aren’t quite as significant as most people believe. Most of them only cover a limited number of miles per year, and they require the user to avoid significant damage or modifications to the vehicle. These terms are usually open to negotiation, so people who expect to run into trouble with one of them, such as the mileage limit, can avoid most of this drawback with a little bit of effort.
4. Long-term Impact
The biggest difference between buying and leasing only shows up in the long-term. A person who leases a car is done with it after the lease ends, but a buyer owns the car for as long as they want to keep it. That means that they need to pay attention to its value, and have a chance to sell it to a new owner.
That is a mixed blessing. On one hand, the buyer ends up with equity in the vehicle, and they can sell it to recover some of their investment. The downside is that cars lose a huge amount of value over time, so the equity is rarely worth much. They can use the car for as long as it will run after they pay off the loan, which is good for people who can maintain it, but it does require either a lot of time or money to keep the care running and prevent them from upgrading to a new model.