Should You Buy Or Lease A Car? Use This Guide
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If everyone had their way, most people would buy a car with cold, hard cash. However, the reality is that not everyone has the luxury of having extra cash lying around.
Whether it’s new or used, getting a vehicle is a significant investment that requires serious thought. One of the toughest decisions before you end up in a driver’s seat, is choosing between buying or leasing a car.
Should you buy or lease a car?
Each has its own pros and cons. So for today’s post, we’ll break down the benefits and drawbacks of both buying and leasing a car and which option is right for you.
Buying vs. Leasing: What’s the Difference?
Should you buy or lease a car? If you want to make the right decision, you’ll need to understand the differences between the two.
FEEL SECURE IN THE CAR YOU CHOOSE
You don’t want to buy a car - you want to get the best deal on the car you’re looking for. The CoPilot app will notify you if there’s a similar vehicle in your area at a better price, so you’re always certain you got the best deal available.
Car Buying
Buying a car is fairly straightforward. First, you take out a loan from a bank, credit union, or a lending agency. Second, you use the loan to purchase the vehicle and make monthly payments for a number of years.
A portion of your monthly payment goes into paying the loan interest, and the rest towards the payment of the principal. Higher interest rates equal higher monthly payments. You build equity as you pay for the principal. After you’ve paid it in full at the end of the loan, you become the owner of the car and are free to do whatever you want to it.
Car Leasing
A car lease is a contract in which the lender rents out a vehicle to someone for a predetermined amount of time. Think of a lease as a long-term rental agreement with a dealer or lending institution.
Similar to a car loan, you also need to make monthly payments to the dealer or lender, but the amount is significantly lower. However, unlike with a new car purchase, the dealership or lender will repossess the vehicle at the end of the lease - unless you’re given the option to purchase the car.
Lease payments are lower because you’re not paying for the full value of the vehicle. Instead, you’re covering for the depreciation cost incurred while the vehicle is under your care.
Pros and Cons of Buying a Car
Before you go down the route of purchasing a new or used vehicle, consider these pros and cons:
Pro: Car Ownership
Between these two options, buying or financing is the straightforward path to car ownership. Plus, the process is easy: take out a loan, make monthly payments, and own the car by the end of the term.
In addition, you have the right to sell or trade the car before you pay it off. The process isn’t as easy as selling or trading a car you already paid off, but it’s possible. You can either trade it in with the dealer or sell it to a private individual.
Con: Higher Monthly Payments
Since you’re paying for the full value of the car, expect to pay higher monthly payments. Of course, this depends on the value of the vehicle, the terms, and other factors like interest rates, taxes, and fees.
For your reference, the average American pays a monthly premium of $563 for new vehicles and $397 for used vehicles.
Pro: No Wear and Tear Charges and Mileage Restrictions
Essentially, you can drive your car as much as you want without worrying about mileage limits. In addition to zero mileage restrictions, there are also no “normal wear and tear” charges to be concerned about.
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Con: Repair and Maintenance
The pride of owning a car comes with a combination of things - good and bad.
One of the main downsides of car ownership is that the burden of paying for repair and maintenance falls on your shoulder. It’s all fun and games until something breaks, and you have to pay for it.
Pros and Cons of Leasing a Car
If leasing sounds like a good option for you, make sure you take into account the following benefits and drawbacks before signing:
Pro: Lower Monthly Payments
For people who are trying to keep their spending in check, a car lease may be more suitable since monthly payments are lower than buying the same car. Monthly lease payments are generally 20-30% cheaper than a conventional car loan.
As mentioned earlier, the lease pays for the depreciation value during the term as opposed to the full price of the vehicle.
Con: Strict Limitations
Most car leases come with very strict mileage restrictions, typically ranging from 10,000 to 15,000 miles every year. Should you exceed those limits, expect to pay about 30 cents per mile.
Also, with most leases, you’re not allowed to make any type of modification to your vehicle. In rare cases where customization is allowed, all custom parts and accessories must be removed before the end of the lease.
Pro: Latest Tech and Safety Features
Leasing lets you drive the most up-to-date vehicle makes and models of your choosing. With a lease, you can choose the newest car available in the dealership with the latest tech and safety features.
You can drive it for a few years and exchange it for the newest model after the lease expires, no problem.
Con: Hefty Termination Fees
When you lease, make sure that you can stick to the contract. Otherwise, you’ll incur expensive termination fees if you can’t. If you wish to get out of the lease without penalties, consider transferring the lease to another person via services like Swapalease and LeaseTrader.
When is Buying Better?
Buying the vehicle may be better if you’re looking to minimize cost. Each payment you put into the car goes towards you becoming the owner. After paying off the car loan, you can drive the car without monthly payments. Alternatively, you can trade-in or sell the vehicle - all good options if your vehicle has high resale value.
If you like to customize your car, purchasing the vehicle is best since you can add all sorts of parts and accessories without the fear of additional fees. If you’re a long-distance traveler, buying may also be the better choice since you can drive the vehicle to your heart’s desire without penalties.
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When is Leasing Better?
If you’re on a budget but still want a car, leasing is the way to go. The more manageable monthly fees are a great perk for people with conservative budgets. Plus, the upfront cost is significantly lower when you lease.
People concerned with vehicle repairs will find leasing to be the more attractive option between the two. The vehicle you’ll be leasing, most of the time will be covered by the manufacturer’s warranty, so you don’t have to pay for repairs.
At the end of the lease, you’re given several options like trading in the car or lease or buy another.
Get a Curated List of the Best Used Cars Near You
The CoPilot car shopping app is the easiest way to buy a car. Tell us what you’re looking for and we’ll search the inventories of every dealership in your area to make you a personalized list of the best car listings in your area.
Only looking for newer models? CoPilot Compare is the search engine for nearly-new cars. Only see cars five years or newer with low mileage — CoPilot Compare is the best way to find off-lease, early trade-in, and CPO cars.
The best part? CoPilot is built using the same technology that dealerships use to buy and sell their inventories, so we have more info on each vehicle than competitors. CoPilot doesn’t work with dealerships, so there are no sponsored posts or other shady practices — just the most info on the best cars. Check out our About Us page to see how CoPilot works.
