If you are asking yourself whether to buy or lease a car, be prepared to answer even more questions before reaching a conclusion. First, think about your lifestyle, driving needs and budget.
Financially speaking, there are real costs whether you lease or buy. You may pay less upfront to lease, but fees and charges add up in the car dealer's favor. You may have a bigger payment if you finance a vehicle, but any equity is yours once the loan is paid – and you can drive the car as long as you want.
In short, leasing means you're paying to use a vehicle. When you buy, the car is yours until you decide to sell or trade. As with any major financial decision, learn as much as you can and pay attention to the details.
Leasing pros & cons
- Your payments will typically be lower because you are covering the cost of the vehicle depreciation rather than its full purchase price.
- You can drive a new car – equipped with the newest features – for two to four years and then move on. A factory warranty may be in effect while you drive the vehicle, meaning major maintenance will not be your responsibility.
- If you exceed mileage limits (usually 12,000 – 15,000 per year), you will pay penalty fees.
- There may be charges to pay if you terminate the lease early, have neglected general maintenance or cause excessive wear and tear on the vehicle.
Buying pros & cons
- You can choose to drive the vehicle for years or sell it soon.
- It may have equity to use as trade-in value or cash in your pocket when you're ready to sell.
- You can drive as much as you choose with no mileage limits.
- General maintenance is recommended but not required.
- The vehicle is yours to modify or customize as you like.