Leasing vs. buying a car

Whether or not to lease or buy a car depends on what you need from your vehicle. Are you driving it for business? How many miles do you typically drive each year? What are your lifestyle goals and demands for the next 2-3 years?

Lease

Pros

• Since you’re only paying for the depreciation of the car over the term of the lease instead of the full price, leases allow much lower monthly payments.
• Easier transition to another car since you simply return the leased vehicle to the dealer at the end of your lease.
• Flexibility: If you like the car and decide to keep it, you can finance the purchase more reasonably. If you’re ready for something new, you just return your current lease and call it a day.

Cons

• You won’t have any equity in the car at the end of the lease. Like renting a home, you’ve put a monthly allowance into something that won’t return longer term stability or investment.
• You can’t customize a leased vehicle with modified parts like stereo systems or aesthetic updates.
• Exceeding mileage limitations could result in much higher expenses. Most leases allow 12,000 to 15,000 miles per year.

Buy

Pros

• No mileage limitations. You get to keep and drive the car as long as you choose without financial penalties.
• You can make as many changes as you please. From engine upgrades to paint jobs, it’s up to you.
• When you sell the car, you’ll get a cash return towards a new vehicle.

Cons

• Maintenance: Sometimes the terms of a lease include free or discounted maintenance from the dealer. When you buy a vehicle, maintenance costs are on you.
• While you won’t be charged for excessive wear and tear like you would be when leasing, it could lower the value of the car when it’s time to sell.
• When it’s time for a new car, you have to make arrangements for trading or selling your current vehicle.

Should I lease or buy a car?

If you’re driving the car for business, don’t plan on putting a ton of miles on it each year, and are comfortable having to keep a car in great condition without customizations, leasing could be right for you. Or if you need a small, fuel-efficient car right now but think you might need to switch to an SUV to accommodate a family or pets, leasing is a good option because it allows you to plan on an easy switch in a few years and gives you time to save a down payment for a purchase. If you know you’ll drive a vehicle long term, plan on putting high mileage on it, and value being able to customize it, buying could be a great option.