October 31st, 2020
October 31st, 2020
Is it better to buy or lease a car? These days, with so many options, it can be hard to know what the best choice is for you.
The truth is, there are a lot of pros and cons involved in both buying and leasing; what this means is that there's no objectively right answer! In other words, whether it is better to buy or lease a car depends on you and what you are looking for, as well as what your needs and limitations are.
In this guide, we'll talk about the benefits and drawbacks of both buying and leasing. By the end of this article, you'll have much more information about how the two differ. Hopefully, you'll be able to decide which choice is perfect for you!
Please be advised this guide does not constitute legal advice. Everything herein should be taken as informational only.
Without further ado, let's discuss buying vs. leasing a car.
First, let's get the basic definitions of buying and leasing out of the way. Leasing a car is the process of paying for the use of the vehicle, without paying for any of the ownership. Leases in the United States can be of all different lengths, but a three-year, 36,000-mile lease is often standard. No matter what the term of the lease, it will always eventually end. In other words, the duration of a lease is finite. Leases often come with many restrictions, such as the mileage limit, insurance requirements, and a ban on any kind of customization. This is because you're not, nor will you ever be in a lease, paying for ownership of the car. The car still belongs to the dealership, and you are simply paying to get to drive it for the lease term. This is why it's so important that if you are thinking about getting a lease, you read the Vehicle Lease Agreement carefully, to understand what you can and can't do with the leased vehicle.
Buying a car, on the other hand, is much simpler. It involves paying a dealership and getting ownership of your new vehicle. Sometimes, you can buy a vehicle from a private owner, through a Vehicle Sale Agreement. Most often, you'll make a downpayment to the dealership/financing company in order to drive away with the car, and then make monthly payments until it is paid off. Sometimes, however, people want to pay for their vehicle upfront, in full. In that case, the full payment would be paid to the dealership and then the car would be yours. A car purchase, unless a lease, is forever. In other words, although you can obviously sell the car when you no longer wish to have it, a purchase does not have any finite duration. Once you buy the car, it is yours indefinitely.
When deciding to lease a car, you will likely find that you'll have a lower (or nonexistent) down payment, as well as lower monthly payments. This is because when you get a lease, you are only paying for the depreciation on the car over time (as well as applicable taxes). This alone may make it more attractive, if you need a vehicle but are short on upfront cash.
Many people choose to lease for this reason: you can get a brand new car every few years. Especially in the past 15 years, the technology inside new vehicles has been changing at a rapid pace (for example, just the switch to Bluetooth audio was big several years ago and now, many phone companies have switched their charging ports). If this is something that's important to you, or if you'd simply like to have the excitement of a newer car every few years, leasing could be an attractive option.
Unless you go over mileage, a lot of the time with leases, repairs will be covered by the lease warranty. This definitely adds peace of mind, as it can be a hassle to try and figure out how to repair your car and pay for it yourself. With a lease, all that is left to the dealership.
Although leasing can be attractive for many reasons, if you do it several times, you'll constantly have a car payment. Because you get a new vehicle every few years, you'll also sign a brand new lease every few years. In other words, you'll hop from paying one lease to the next, constantly having to make a monthly payment.
Closely related to the point above is that fact that you'll never own or have any equity in any of your vehicles. If you're not someone who worries about this kind of thing, it may not matter, but if you'd like to spend money a bit more wisely to build up equity or eventually have ownership, leasing may not be the way to go.
Many American leases prohibit the lessee from moving the vehicle to another location. In general, most leases prohibit moving the vehicle out of the country, but some will also prohibit the leased vehicle being moved out of the state. This is something to consider if you are planning a move or have a job that requires you to move temporarily. Because state taxes and registration requirements are different in each state, you may get hit with additional fees, even if you plan to bring the car back to its original state, or you may be prohibited from doing it altogether.
One of the most irritating things about a lease is that it comes with a mileage cap. At the end of your lease, when you turn it in, if you go over the mileage cap, you'll get charged a fee per mile, which could end up amounting to $1000 or more, depending on how far over you've gone.
If, for some reason, you decide not to keep the vehicle for the entirety of the term, you'll likely get charged to turn it in early. This is because dealerships count on receiving that payment throughout the life of the lease and if you turn it in early, they lose out on that money. Therefore, more often than not, you'll get hit with early termination fees.
Just like mileage overages, the costs for excess wear and tear can make the end of your lease very pricey. Different dealerships have different standards for what they consider "normal wear and tear," but no matter what, you're completely at the mercy of the dealership. In other words, if they think something is excess wear and tear, you're going to get charged and there's no arguing that fact.
When you purchase a car, it belongs to you, which means you aren't subject to the same dealer restrictions you would be with a lease. One of the biggest benefits to owning a car is that there are absolutely no mileage restrictions: you can do what you want with your vehicle and drive it as far and as long as you want without paying anyone!
Customizing your own vehicle is another big benefit of ownership. If you want to add rims, or paint it a different color, or add a sound system, you can do all of those things. You also won't get charged by the dealership for extra wear and tear because, well, the car is yours! Of course, you will have to pay to have it repaired if needed, but the choice to have it repaired or not is up to you.
Although the upfront costs may be greater (more on that below), if you plan to drive the car for a long time, it'll cost less than a lease. This is because you build equity in the vehicle that belongs to you.
One of the reasons many people choose to purchase a vehicle is because eventually, they will have no more car payments. With a lease, you continue paying each time you get a new lease. With an owned vehicle, sooner or later it will be completely paid off and you'll be free of car payments.
Leases often have a minimum amount of insurance required. With your own vehicle, you won't be subject to any such restrictions and can decide on whichever insurance you want, subject to the laws in your individual state.
Whenever you've decided that your car has reached the end of its life for you, you can sell it. This is one of the biggest and most important benefits to ownership: the potential for some return on the money you put into the vehicle. Depending on how long you've had it, it may be a very small amount of money, as the car may have depreciated a lot. However, it is still better than no money received at the end of a lease.
As discussed above, as soon as you drive the car off the lot, it will start to depreciate. Even though it's such a large purchase and asset, the longer you own it, the more it will depreciate. However, the longer you own it, the more use you'll get out of it, as well!
The down payment and monthly payments for your car will be greater if you buy than if you lease. In fact, sometimes you can lease a car with no money down. This is because when you own, you are paying for everything related to the vehicle, instead of just the depreciation as in a lease.
With a lease, you can simply turn your vehicle in and get a new one. When you own a car, it may be harder to get a new vehicle. It's true that you can sell, but you'll then have to start the process on a new purchase of another car. Seling your car often is a long process that requires a lot of work - and you must ensure that you stay safe while doing so. Additionally, depending on how old your car is, it may be difficult to sell, and if your money is tied up in the car, it would make getting a new one more difficult.
As you can tell from all of the information above, the choice to buy or lease a car is solely an individual one. In other words, what may be right for one individual is not right for another.
Hopefully, this guide has given you all the information you need to make the best choice for you.
About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.