Leasing Vs. Buying

The controversial topic of whether it is better to lease or buy a new vehicle has been argued in many forums and is a constant argument among car shoppers. The truth is that there is no straight answer. Whether one should lease or buy depends on many factors including your lifestyle, the length of time you usually hold on to a vehicle and most of all it really comes down to your personal preference.

Leases and purchase loans are two different methods of automobile financing. It is important to note that leasing is NOT renting. The lease loan finances the use of a vehicle; the purchase loan finances the purchase of a vehicle. Each has its own benefits and drawbacks.

There are a few key points one should consider before deciding to lease or buy.

Most new and used cars lose thirty percent of their value as soon as you take them off the lot, so if you were to attempt to sell your new car after three years of ownership, you would actually lose more money than it would have cost you to lease the same vehicle over a three year term.

For example, if you lease a new car that is valued at $20,000 and will have an estimated resale value of $13,000 after 24 months, you are paying the $7000 difference, plus finance charges and possible fees. When you buy the same vehicle, you pay the entire $20,000, plus finance charges and possible fees.

Though the short-term monthly cost of leasing is ALWAYS SIGNIFICANTLY LESS than the cost of buying, it is important to note the restrictions and requirements of a lease. For example, auto leases restrict you to a maximum number of miles allowable through the life of the lease and a certain level of normal wear & tear to the vehicle.

If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don’t like trading and selling used cars, don’t care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should lease.

If you don’t mind higher monthly payments, prefer to build up some trade-in or resale value (equity), like the idea of having ownership of your car, prefer paying off your loan and being payment-free for a while, don’t mind the unexpected cost of repairs after warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, expect lifestyle changes in the near future, and don’t like the risk of possible lease-end charges — then you should buy.

In short, whether you lease or buy depends on what is most important to you. We all have different lifestyles and priorities — in cars, life, and in finances. Car lease-versus-buy decisions must be made with your own lifestyle and priorities in mind. What’s right for one person may be totally wrong for another.

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