When it comes time to buy or lease a new car, many people are unsure of which option is the best financial decision. Both buying and leasing have their pros and cons, so it can be difficult to decide which is the right choice for you. In this blog post, we will break down the differences between buying and leasing a car, so that you can make an informed decision about which option is best for your needs.
Calculate the total cost of ownership for both buying and leasing a car
When deciding whether to buy or lease a car, there are several factors to consider beyond just the upfront cost of each option. You’ll want to look at the total cost of ownership over time, as well as other benefits such as maintenance and repair costs. Here is a comparison of buying versus leasing a car that can help you decide which is the better choice for you:
Buying
When you purchase a car, you own it outright and it is usually cheaper in the long run when compared to leasing. However, buying does require larger initial payments, typically an up-front down payment followed by higher monthly payments for financing. Additionally, buyers must cover all related fees such as registration and taxes.
Leasing
Leasing requires lower upfront costs and smaller monthly payments than buying, as you are only paying for the depreciation of the car during your lease term. However, there is typically a higher interest rate associated with leasing, so it’s important to factor this into the overall cost of ownership. Additionally, leases come with mileage restrictions and certain fees for early termination or exceeding your mileage limit.
Consider how long you plan to keep the car
Buying is most cost-effective for people planning to keep their car for a long time, as it is cheaper in the long run than leasing. On the other hand, if you only plan on keeping the car for a few years, leasing is a better option as it is cheaper upfront and allows you to upgrade more frequently.
When determining whether it is cheaper to buy or lease, consider your budget and driving habits. If you are looking to save money in the short term, leasing is generally more affordable as monthly payments tend to be lower than loan payments. Additionally, if you drive above average miles per year (usually 12k+/year) buying is typically a better option as leases come with mileage limits and charge hefty fees for exceeding the limit.
Finally, consider which incentives are available to you when deciding whether it is cheaper to buy or lease a car. Many car dealerships offer special discounts and promotions such as cash back, zero percent financing, or reduced monthly payments.