Having a car can be a great benefit, especially when attending college away from home, or when starting your first job. If you’ve determined that having your own set of wheels will serve you well, the choice might come down to two options: should you lease or buy? For me, I’ve always been in favor of buying cars, even if that means paying it off over time. However, there are a ton of benefits that come with both options, along with a few downsides. Before you swipe that credit card or hand over a good amount of cash, consider the following pro’s and con’s of leasing or buying a car. The decision may have a long-term effect on your finances, so make sure you’re making the right decisions for you.
The Pros and Cons of Leasing a Car
Leasing a car can be a tempting proposition, but it comes with its own set of advantages and disadvantages. Below are the pros and cons to help you make an informed decision.
Pros of Leasing a Car
Lower Monthly Payments. Leasing typically requires lower monthly payments compared to buying a car. This is because you’re only paying for the vehicle’s depreciation during the lease term, not its full value.
Newer Cars. With a lease, you can often drive a new car every few years. This means you can enjoy the latest technology, safety features, and styling without the hassle of selling or trading in your car.
Lower Maintenance Costs. Most leased cars are under warranty during the lease term, so you don’t have to worry about costly repairs. Also, because you’re driving a newer car, it’s less likely to need repairs in general.
Fewer Upfront Costs. Leasing usually requires little or no down payment, which can be beneficial if you don’t have a lot of cash on hand.
Tax Benefits for Businesses. If you’re leasing a car for business purposes, you may be able to deduct a portion of the lease payments as a business expense.
Flexibility. Leases typically last 2-4 years, which gives you the flexibility to change vehicles more frequently.
Cons of Leasing a Car.
Mileage Restrictions. Most leases have mileage restrictions, and exceeding these limits can result in hefty fees. If you drive a lot, leasing might not be the best option for you.
No Ownership. When you lease a car, you don’t own it. This means you have no equity in the vehicle and no asset to sell or trade-in at the end of the lease term.
Penalties for Early Termination. If you want to end your lease early, you’ll likely have to pay a penalty. This can be a significant expense, especially if you still owe a lot of payments.
Potential for Higher Insurance Costs. Some leases require higher levels of insurance coverage, which can increase your monthly insurance premiums.
Limited Customization. When you lease a car, you’re often restricted in how you can customize it. This can be frustrating if you like to personalize your vehicle.
Potential for Additional Fees. Lease agreements often come with additional fees, such as acquisition fees, disposition fees, and wear and tear fees. These can add up quickly and make leasing more expensive than it initially seems.
Leasing a car has its advantages, such as lower monthly payments, driving a new car every few years, and lower maintenance costs. However, there are also downsides, such as mileage restrictions, no ownership, and potential for higher insurance costs. It’s essential to weigh these pros and cons carefully and consider your specific needs and preferences before deciding whether leasing is the right choice for you.
The Pros and Cons of Buying a Car
Buying a car is a big decision that comes with its own set of advantages and disadvantages. Here, we’ll take a closer look at both the pros and cons to help you make an informed choice.
Pros of Buying a Car
Ownership. When you buy a car, you own it outright. This means you have an asset that you can sell or trade-in when you’re ready to upgrade.
No Mileage Restrictions. Unlike leasing, there are no mileage restrictions when you own a car. You can drive as much as you want without worrying about additional fees.
Customization. When you buy a car, you can customize it to your heart’s content. This includes adding aftermarket accessories, changing the paint color, or upgrading the interior.
No Penalties for Early Termination. If you decide you want to sell your car before it’s fully paid off, you can do so without incurring any penalties.
Lower Insurance Costs. Generally, owning a car comes with lower insurance premiums compared to leasing. This is because you can choose your coverage levels based on your needs, rather than being required to carry a certain amount of insurance.
Equity. As you pay off your car loan, you build equity in the vehicle. This can be beneficial if you need to borrow against the equity in the future.
No Additional Fees. When you buy a car, you don’t have to worry about additional fees like acquisition fees, disposition fees, or wear and tear fees.
Cons of Buying a Car
Higher Monthly Payments. Generally, buying a car results in higher monthly payments compared to leasing. This is because you’re paying for the full value of the vehicle.
Depreciation. Cars depreciate quickly, which means they lose value over time. When you buy a car, you’re responsible for this depreciation, which can result in a lower resale value.
Potentially Higher Maintenance Costs. As a car ages, it may require more maintenance and repairs, which can be costly.
No New Car Every Few Years. When you own a car, you’re stuck with it until you decide to sell or trade it in. This means you won’t be able to enjoy the latest technology, safety features, and styling as you would with a lease.
Higher Down Payment. Buying a car typically requires a higher down payment compared to leasing, which can be a barrier for some people.
Tied Up Capital. When you buy a car, you’re tying up a significant amount of capital in an asset that will depreciate over time.
Buying a car has its advantages, such as ownership, no mileage restrictions, and the ability to customize. However, there are also downsides, such as higher monthly payments, depreciation, and potentially higher maintenance costs. It’s important to carefully consider your needs and preferences before deciding whether buying is the right choice for you.
At the end of the day, I’ve preferred to buy my own car. Being able to use my car without mileage restrictions, and lower insurance costs are big for me. I also don’t mind not being seen with a new car every few years, as I just prefer a safe car that can get me from Point ‘A’ to Point ‘B’. Buying my cars is great when I don’t have to make payments on my car once it’s paid off.