Should You Buy or Lease a Car?
The short answer is… “it depends.” The right financial decision for you depends on your individual situation, and no one can tell you whether it’s better for you to lease or to buy.
In this post, I will walk you through the major factors that will help you arrive at a decision. You will learn about the implications of each choice, and you will learn how to make the best decision for you. I will also tell you about one option that is overlooked by most people “ where the answer to whether you should buy or lease your car is probably a “maybe.”
You already know that buying is less expensive than leasing. So why would you want to buy a car and why would you want to lease? If you can answer those two questions for yourself, you’ll know whether it’s better to buy or lease.
Benefits of Buying vs Leasing a Car
You're probably wondering, “Is it better to lease or buy a car?” “Is there a difference between the two?”
When it comes to leasing vs buying a car there are a lot of factors to consider:
- Cost
- Favorable tax laws
- Interest rates
- Bang for your buck
Etc.
Is it better to lease or buy a car?
Simply put, whether or not you should buy or lease a car depends on your financial situation and individual circumstances. You can read about the advantages and disadvantages of leasing cars here.
Overall, if you are looking for a good value on a new car, the reality is that buying a car is usually a better value in most cases. The reason for that is simple: you can spread out the cost over a long period of time.
As a result, most people who own cars are much happier with the value of their vehicle than people with leased cars.
However, if you are not in the position to make long term car payments, leasing makes a lot of sense. For some people, it also makes sense to lease a car if they want a new car every 3 years or sooner. Many cars have a three year warranty, so if you trade it in after three years, your maintenance costs should be covered.
Benefits of Leasing a Car
People choose to lease cars for a variety of reasons. For example:
They may not want to use their own money or they may not have enough money set aside for a down payment.
They may not be ready to commit to a long-term car loan.
They may not be able to qualify for a loan because of their credit.
They may not be able to pay cash and want to build up equity in a car.
They may want a new car every few years.
When it comes to credit, leasing is a better option. When you lease a car, the credit allows you to take on more debt. You never own the vehicle so you don’t have to worry about protecting your assets by paying off the loan.
Compared to buying a car, leasing has a lower monthly payment and higher monthly mileage allowance.
You can always return your car and walk away if it’s not what you expected. The majority of dealers will allow you to test drive any vehicle for a few days and return it if you spend that time unhappy with it.
Lease payments will be tax deductible because the vehicle is technically owned by the leasing company.
Benefits of Buying a Car
It is often said that buying a car is always a better decision than leasing one, right?
Discussing all the benefits of buying a car would take up a complete book. However, in the following article we’ll discuss the benefits of buying a car (in comparison to leasing it) that are important for everyone, whether they’re buying their first car or their tenth car. If we’re going to take a deeper look into the limelight, the much better terms of car loans are going to be the best place to start.
How to Find the Best Car Lease Deals
Guess what? You can lease almost all types of vehicles – from a small sedan to a large SUV, a pickup truck and even a big rig. Aside from the price of the car, the type you lease can determine other important factors that can impact your enjoyment of the car.
For instance, if you are looking to lease a sports car, you’ll probably also want to lease a convertible or a coupe, because you want the experience of driving with the roof and windows down. On the other hand, if you want a luxury sedan, you’ll likely want to lease an executive one, because there’s no way you’d want to deal with the low resale values and higher maintenance costs around the mini-van end of the segment.
In other words, it’s important to match the type of car you lease with the way you expect to use it. Are you going to do most of your driving on the highway or in the city? It’s important to match that usage because driving performance (speed, handling) and fuel consumption will be vastly different between different vehicles.
The Difference Between Lease and Finance
When it comes to buying a new car it is a good idea to know the difference between leasing and buying a car.
A common misbelief is that a lease is basically the same as a loan with no money down and that is just not true. While you do not have to pay cash up front, there is no getting around the fact that you are spending money. You are also making an even larger commitment by signing a deal to have that car for three years.
So the first thing to remember is that you are spending a lot more than you would on a car loan.
The second thing to know about a lease is that you get the tax benefits of both buying and leasing a car. When you finance a car, you can deduct the interest but not the principal. Well, with a lease, you also get to deduct the principal, not just the interest. But you also have to add up the lease depreciation to the interest to get the deduction.
Weighing the Pros and Cons of Leasing a Car
Deciding whether it’s better to lease or buy a car is one of the biggest decisions you can make regarding your car. If you lease a car, you’ll likely end up paying more in the long run compared to what you would pay if you purchased the car.
But if you plan to trade it in for a new car in a few years, it may not make sense to buy a car because you’ll still have to pay the sales tax at the time of purchase, even if you don’t drive the car for very long.
You have to look at your whole situation, and then make the most informed decision. If you’re considering leasing, I suggest you take a look at this article that answers some basic questions about leasing a car to help you decide if it’s an option for you.
If you’re considering purchasing, you can find tips and resources here that might help you with the financial and emotional decision. Both buying and leasing a car have pros and cons to consider so do your research on what’s right for you.
If you’re considering buying a car, be sure to see this article on where to find the best deals on new cars.