Is It Better to Lease or Buy a Car? What to Know Before Hitting the Lot

Buying a new car is a big move. Almost up there with buying a house. But is it your best choice? Or should you lease instead? The route that’s right for you depends on how you’ll be using your car.

Pump the breaks. Should I buy or lease a car?

If you don’t plan on road tripping a lot, leasing a car could be the more budget-friendly option. Because lower monthly payments. Leasing is like having a long-term rental, so the monthly payments correspond to the amount the car is expected to depreciate (not the full value of the car.) That makes it an average of over $100 less each month for a leased vehicle than a financed one. 

Plus, you can always have the new car everyone’s talking about. Since you can return your car and hop in a new one whenever your lease is up. Hint: that’d be every few years.

Are you saying leasing a car is better than buying?

Not necessarily. Although prices are a little out of control right now, buying a car still has its perks. Like road trips with no cap on mileage. And the ability to make custom changes without the dealership asking you to undo them.

Also, while a leased car means lower monthly payments, experts agree buying a car is still the cheaper option in the long run. Because you have no equity in the car when your lease is up. And if you decide to keep your car, you’d have to come up with the value of the vehicle.Which means it would’ve been easier on your wallet to buy the car in the first place. 

Any downsides to leasing I should keep in mind? 

Besides the mileage restrictions you’ll have with a leased vehicle, you’ll also need to be careful not to cause excessive damages that could lead to additional fees. Think: a scratch that’s bigger than a quarter. And remember: You won’t own the car after making those payments, unless you go through the normal buying process at the end of your lease.

What are the cons of buying a car?

Not only does buying a car mean higher monthly payments, but you’ll likely have to make a bigger down payment, too. Experts recommend putting 20% down to buy a car. More money down does mean you can borrow less. But it also means your savings will take a hit. And if you own your car, you’re responsible for long-term maintenance costs.

theSkimm

Before you head to the dealership, think about your financial goals to decide whether leasing or buying is best for you. If you’re a road-tripper, the former may not be a good idea.