When you’re ready to get a new car, you have to decide whether you want to buy it or lease it. One option is not inherently better than the other. The right choice is the one that’s best for your circumstances. To help you make the right decision, here’s a guide on the differences between buying and leasing.
Monthly Payments
When you borrow money to buy a car, your monthly car payments go toward paying the interest and principle of your loan. It’s a very straightforward arrangement. Monthly lease payments are a little more complicated. What you pay each month covers several costs: the amount of money the car is depreciating in value, interest or rent fees, and taxes.
While it might sound like you end up paying more with a lease, that’s not true. Monthly payments are almost always higher when you buy a car because you’re working toward ownership. In contrast, a lease is essentially a contract that allows you to borrow the car for a set period of time. If low monthly payments are important, consider going with a lease. However, if car ownership is your main goal, opt to purchase the car.
Customizing the Car
If you want to customize or modify your vehicle, you need to buy the car. In most cases, leases restrict the ability of drivers to make physical changes to the vehicle.
Getting the Vehicle Off Your Hands
One of the beauties of a lease is that when your contract term expires, you turn in the car, pay any outstanding fees, and have no further obligations. Be aware that ending a contract early typically results in costly early termination fees. In contrast, those who buy a car have to sell it or trade it in when they’re done with it. They don’t have an automatic return option available to them. At the same time, they can sell it or trade it in at any time without having to worry about the early termination fees that come with a lease.
If you want a low hassle vehicle return option, opt for a lease. If you think you may not want to stick with a lease for a multi-year term, then you may be better off buying to avoid early termination fees.
Mileage and Condition
When you buy a car, you can drive it as far as you want. If your car has excessive wear and tear, it’s an inconvenience and may require you to pay for some repairs. With a leased car, you’re limited to how many miles you can drive it each year. Drivers who exceed the limit usually incur fees. In addition, a leased car that shows damage from excessive use could cost the driver at the end of the lease term.
If you need to drive long distances or put demands on your vehicle, you probably need to purchase it. Leasing is a great option for people with short commutes in safe areas where accidents are rare.
By weighing the pros and cons of each option, you can evaluate your own situation and decide if it’s best to lease or buy a car.