If you’re in the market for a new vehicle, you may be wondering—is it better to lease or buy? The answer really all depends on the state of your credit and the car you want to drive home.
Leasing Versus Owning
Buying and leasing come with their fair share of benefits. When you lease, you get a sort of hassle-free deal. If your vehicle needs maintenance, you can bring it back to the dealership and the technicians will work on it for free. Once your lease is up, you can either choose to extend it, purchase the car, or trade it in for a newer and faster model. That may sound nice, but you also need to consider the one main drawback: you don’t own the vehicle at the end of the day.
When you BUY a vehicle, however, and once you pay off the loan, it’s yours free and clear to do what you will with it. However, you’re responsible for all maintenance and repairs, which can become costly.
So, now that you understand the differences between leasing and owning, it’s time to decide which is right for you. This post lists some considerations for you to make to help you make the ultimate decision.
Available Down Payment
If you have a substantial amount of money saved, you may be better of purchasing a new vehicle as opposed to leasing one, as the down payment may reduce your debt enough so that it can be completely paid off within a few years and without having to make outrageous monthly payments. However, if you have little money saved, leasing may be a better option, otherwise you risk being stuck with a monthly payment you can barely afford. Most lease agreements have low down payments, and many dealerships waive the down payment entirely.
Monthly Cash Flow
Leasing often comes with lower monthly payments than buying because you are paying for the depreciation of the vehicle rather than the vehicle itself. If you don’t have a significant amount of cash flow each month, or if your income varies from month to month, leasing may be better for you.
Vehicle Needs
If you need a family sized vehicle for weekend getaways or to run the kids to and from soccer practice, chances are you aren’t going to be putting a lot of miles on your vehicle. If that is the case, leasing may be an excellent option. Many dealerships offer low-mileage leases, which are more affordable than the customary 12,000- to 15,000-mile leases. However, if you plan to use your vehicle daily, leasing may not be the best option, as if drive more than allotted miles, you’ll have to pay extra for each mile. That can really add up, especially if you don’t negotiate the fee prior to signing the lease.
Your Credit
Many people choose leasing over buying simply because they have to. Depending on your income or your credit situation, you may have a difficult time obtaining an auto loan, especially the case if you have little to no down payment. If you’re not approved for a loan, and if you absolutely need a new vehicle, your only option may be to lease. Though your monthly payments might be slightly higher if you have bad credit, chances are good that you will at least be approved for a lease agreement.
There are auto loans available for those with bad credit too. If you have your heart set on buying, learn the ABCs of auto loans to find a loan that is right for you.
Your Plans for the Future
Some people don’t like to drive the same car for 10 years at a time, especially when they can trade in an older model for a newer one every few years. If you like cars that are shiny and new, and if you like a vehicle fully equipped with the latest gear and gadgets, leasing may be right for you. However, bear in mind that you shouldn’t enter a lease agreement you don’t intend to keep. If you try to get out of a lease early, you may end up paying a fee that is equivalent to up to six months of payments, according to Smart Money.
Leasing and buying are huge commitments, and both come with their fair share of pros and cons. If you plan on investing in a new vehicle, do your research, and make sure that when you do make the final decision, it is one that you can live with (and afford!).
