Are you in a dilemma when it comes to car leasing vs owning? I often envied my friends and neighbors leasing brand-new cars every few months. But I researched the pros and cons of car leasing vs buying. Read more to get the real facts about what type of buying suits you and your lifestyle.
Car leasing vs owning
Whatever car or any other vehicle you would like to buy, deciding whether to buy a new car or lease comes down to one’s needs and lifestyle. Are you a driver who changes a car a lot? Do you hate taxes and car maintenance? Let’s look into the what are pros and cons of owning and leasing. We will also look at what are the questions you should ask yourself before going ahead and buying your next vehicle.
What is car leasing?
Leasing a car means you basically pay a monthly payment for driving a car. This monthly payment for leasing a car is lower than what you would pay if you own a car auto loan. Leasing does not involve any auto loan. You basically pay a low monthly payment which is less affordable compared to paying a loan of full car value.
The main difference is that when your lease ends, you have to give the car back to the dealer and you are no longer the owner of the car.
Should You Be Own or Lease a New Car?
When I was thinking of owning my first car, I wanted to own a nice sedan. I don’t even know that there is a leasing option. I could have used the leasing option and paid a lesser monthly payment but then I don’t want to give my car back when the lease expires. At the same time, the monthly payment was attractive.
You see the dilemma here and sure owning a car feels good but what if you don’t want to pay a higher payment for a car loan and pay interest especially when your credit score is low?
Car leasing vs owning – which finance option will be suitable for you?
If you want to own a car for a long time say 15 years and you tend to have a personal connection with your car or something like that, you should be ready to answer the two questions. Are you willing to pay the full loan that you will take for the new car? What are your driving needs? Are you a regular commuter or need a car just for running errands?
According to a survey says that only 6% of households leased a car.
Besides, if you already own a car? Read my post on how you can save money on gas.
Here’s a quick look at leasing vs owning a car
Image Courtesy: businessinsider.com
Renting vs Owning a car: What’s the Difference?
Now let’s look at the pros and cons.
Pros and cons of leasing a car:
- No or low down payment
- Usually covered by warranty
- Lower monthly payments
- No upfront sales tax fees
- No depreciation concerns
- Excess mileage penalties
- Fees for excessive wear and tear
- Early lease termination fees
- Generally higher insurance premiums
- Monthly payments
Pros and cons of owning a car:
- Eventual ownership of a car
- No mileage limits
- Ability to sell car anytime
- Freedom to customize/modify
- Generally lower insurance costs
- Unpredictable resale value
- Higher monthly car loan payments
- Post-warranty maintenance expenses
- Depreciates over time (20% once you buy a car!)
- Large down payment
You can decide if you need to lease or own by using this handy calculator.
Before you decide to own or lease a car
Ask yourself these questions before you decide to own or lease a car:
1. What’s My Budget? – First things first, what can you afford each month? Think about initial costs, monthly payments, insurance, and all the extras.
2. How Long Will I Keep This Ride? – Are you in for a short fling or a long-term commitment? Leases are like dating; you get a new one every couple of years while owning is more like a marriage.
3. How Much Am I Cruising Around? – Take a guess at how much road time you’ll clock in a year. Leases usually have a mileage limit, so if you’re a road warrior, owning might be your jam.
4. Fancy a Fresh Set of Wheels Regularly? – Leasing is like being on a fashion show runway; you’re in a new ride every 2-4 years. With ownership, you’re rocking the same style for longer.
5. Ready for Maintenance Costs? – Owning can mean some extra TLC and cash as your car ages. Leases usually cover you during the warranty period.
6. Want to Add Your Personal Touch? – If you’re into customizing your ride with cool mods or accessories, owning gives you creative freedom. Leases often come with style restrictions.
7. How’s My Credit? – Leasing companies often check your credit score. Also, make sure it’s up to snuff if you’re leaning towards leasing.
8. Dreaming of Ownership Equity? When you own, you’re building equity in your ride. Leasing? Not so much. Think of it as owning a house vs. renting an apartment.
9. Scoping Out the Deals? Shop around for the sweetest financing and leasing deals. Dealerships often have some tempting offers.
10. Depreciation Dilemma – Leases calculate your payments based on how much the car is expected to drop in value. Something to keep in mind.
In conclusion, buy a car if you plan to keep it for a long time, customize it to your style, or if you drive a lot of miles such as commuting, frequent road trips, etc…
Nevertheless, owning is cheaper than leasing in the long run. Before you go, take a look at this nice video that makes everything in one video easy to understand.