Choosing whether to lease or purchase a car isn’t just about your monthly payment. Leasing offers some options that purchasing a car can’t offer. On the flipside, buying a car also offers different options that you wouldn’t get with a lease, so knowing which one is right for you and your life is important!
Advantages to leasing
When you’re thinking about buying or leasing a vehicle, it’s important to balance what your needs are with the type of financing you’re looking into. One of the main differences between leasing and buying a car is the amount of monthly payment you’ll make.
Lower payments
Leasing a vehicle can often offer a lower monthly payment than financing the same car for purchase. The main reason for this is you’re not going to own the vehicle at the end of your lease term. You’ll return the vehicle at the end of your lease term, and you’re free to choose a different vehicle to lease.
Maintenance and repairs
Most new vehicles for sale in the United States today come with some level of warranty or maintenance coverage from the manufacturer. If you choose to lease a car, your coverage could last the whole term of your lease, so you likely won’t be without manufacturer-provided care for your leased vehicle.
Test that tech
Is new technology your wheelhouse? The average lease term length is about three years, so if you choose a lease, you won’t have to wait very long before you get to try out the newest innovations in the tech world.
Buyout option
Say you lease a car and you really like driving it. If you don’t want to turn it in, usually, your lease agreement will have a buyout option. A buyout option allows you to purchase your leased vehicle once your lease has reached maturity.
Disadvantages to leasing
Like almost any financial transaction, leasing also has some disadvantages to consider over a car purchase. Since you won’t own the leased vehicle, lenders often have specific restrictions laid out in the lease agreement.
Mileage limitations
If you’re thinking about leasing a car, you might have heard about mileage restrictions. Leases usually have tight mileage restrictions, due to the fact that you do not own the vehicle you’ll be driving. Typically, you’ll get between 10,000 and 15,000 miles per year. Exceeding your mileage limit often costs you a certain amount per mile over your maximum allowance. Mileage limit fees can range from $0.10 per mile up to $0.25 per mile, depending on the type of vehicle and the lender you choose.
If you’re into long road trips across the country, a lease might not fit your personal style because of the mileage restrictions that could be associated with your lease.
You don’t own it
One of the more limiting factors to leasing a car versus buying it, is that you won’t own the car at the end of your lease. That means you can’t make modifications to your car, you have to be mindful of how you use it or have the money to cover damages the car suffers under your care.
This also means you can’t build equity in your leased vehicle, and you won’t be able to sell it once you’re done leasing it.
Wear and tear
Your lease lender will give you credit for regular use, but if you lease a vehicle and your teenage daughter’s friends decide to fill the car with shaving cream because she made the school team, you’ll probably have some wear and tear fees associated with turning the lease in. These fees can add up, so it might be a good idea to clean and repair your lease before you turn it back in. If the lender assesses fees on your lease, you’re still liable for them, so it’s worth it to make sure you return a clean, reasonably used vehicle.
Buying or leasing – what’s right for you?
Now that you know a little more about leasing, directly comparing a lease to a purchase could help you visualize what’s best for you.
Advantages to buying a car
- You own the car – When you buy a car, even if you get a loan to pay for it, you still own the car. You’re responsible for the payments and renewable costs, like insurance and registration fees, but by and large, you can treat the car however you like. Your lender may not allow you to do certain things while your loan is active, like wrapping the car with decals, but generally speaking, if you want to customize your car with air vents and spoilers, you’re able to.
- No mileage limitations – When you purchase the vehicle, you won’t be restricted on mileage at all. If you want to road trip from Dallas to Boston, you won’t have contractual restrictions on your vehicle’s mileage.
- You can sell it – If life happens and you need to sell the car, you’ll be able to sell it. Since you purchased the vehicle, you’ll keep the car when you’re done with your payments, which is one really huge advantage you’d have over leasing a car.
Disadvantages to buying a car
- Potentially higher monthly payment – A vehicle you purchase could have a higher payment than a leased vehicle, because you’re buying the entire car, instead of paying to drive it for a few years. That extra amount of time often translates to a higher financed amount, which will increase your monthly payment.
- Maintenance costs – While most leases come with manufacturer warranties, after the warranty period is up, you’re responsible for the costs of repair and maintenance of your vehicle. While you may have options to buy additional coverage at the time of purchase, it would still come at a cost you might not have on a leased vehicle.
- Depreciation – Your purchased vehicle will lose value over time. Any down payment money you put into your vehicle will be tied up until you’re able to sell it. As depreciation lowers the value of your vehicle, you could end up losing your initial investment in the vehicle when you go to sell it.
Things to consider when buying and leasing a car
If you’re a person who likes to be in control of your finances as completely as you can be, then purchasing a vehicle might make more sense for you.
But if you’re more interested in experiencing technology and you don’t mind not owning a vehicle at the end of your lease term, then you might want to lease.
Either way, you should consider a pre-qualification from Drive® because in about two minutes or less, you can see loan terms that fit you, and it won’t impact your credit.
