Leasing vs. Buying a Car: Which is Better?

The decision to buy or lease a new car will depend on your own priorities. For many drivers, the choice to buy or lease is a question of dollars. Others love owning their own car more than anything.

In recent years, leasing a vehicle has become a mainstream alternative to buying, but is it right for you?

Before deciding, it's important to weigh the pros and cons of buying and leasing.

With regards to which one is better, there really isn’t a simple answer. Read on to learn which one may be a better fit for you.

1Leasing a Car

Leasing vs. Buying a Car: Which is Better? Leasing

If you’re trying to keep your monthly spending in check, leasing a car tends to offer the perk of making lower payments versus buying the same car.

Leasing a Car Pros

Lower monthly payments – Typically, leases are cheaper than buying a car with financing.

Remains under warranty – When you lease a car, it should be under warranty for the entire lease. It means that you will rarely be required to do anything other than the most common maintenance.

There is always a new car on the horizon – Because your typical rental contract will last 2 or 4 years. In the end, you can lease a new car.

There is no old car to sell – Once your lease ends, you don't have to worry about trying to sell your old car, just jump in a newly rented vehicle and drive away.

Leasing a Car Cons

Committed to monthly payment – You need to make sure you have a stable and predictable source of income for the duration of the lease, as breaking any of these contracts is notoriously difficult.

Mileage restrictions – One of the biggest drawbacks to rental contracts is the strict mileage allowance that applies to drivers. I usually limited it to traveling only 15,000m per year.

It costs more in the long run – Although you may have lower monthly payments, you lose any potential resale value from buying a car, and penalties and other fees may also apply

Initial costs – Lease agreements regularly require security and down payments. You may also be penalized for late payments on default charges. Getting out of the lease can be very costly if you try this before you agreed. Some leases also have built-in wear and tear fees.

2Buying a Car

Leasing vs. Buying a Car: Which is Better? Buying

Buying a new car — or a new used car — is exciting. If you really like a car, should you consider buying it!

Car buying is the traditional and still most popular way to get behind the wheel of a new ride.

Buying a Car Pros

The car will be yours – Most auto finance contracts run for 4 to 6 years, so once you pay off the loan, the car is yours, you can either trade it in for a new model, continue to drive the car with no further payments, or just sell it.

No fees or hidden charges – Once you comply with the driving laws, you can do anything you want with this vehicle without fear of additional costs. Despite the loan, the car is yours as you wish.

Drive all you want – Mileage restrictions do not apply to cars bought with financing. You never have to worry about wear and tear once you have adequate auto insurance; it is unlikely to cost you financially other than paying off the loan.

Buying Car Cons

Higher monthly expenses – Because you buy the car over 4 to 6 years, your monthly payments will always be higher than with leasing.

Loss of warranty – One of the most frustrating aspects of buying a finance car is when it's out of warranty and you have a major mechanical problem. Although the bank or finance company still owns the car, you are responsible for the cost of the repair.

The hassle of reselling the value – One of the major advantages of buying a car is also a drawback. They directly relate the resale value of the car to wear or excessive mileage. So, if you don't take care of the car, it will lose a lot of value before you try to sell it.

What is the Difference?

The main difference between buying a car and leasing it is that you never own it.

You make monthly payments and return the car at the end of the lease. If you get a financing deal at the end of the term, you go away with the car.

Which is Best for You?

Choosing the best option for you depends on your preference.

Owning a car is a part of life for most people, Leases are cheaper in the short term, but a car purchase makes more financial sense in the long term as it usually turns out to be cheaper.

Leasing a car may sound like a good idea - after all, the monthly payments are significantly lower than purchasing a car, but the reality is that leasing is not recommended for most people.

Final Verdict

There are pros and cons to buying and leasing a new car. Whatever path you choose and you have to make a serious financial decision.

Calculate exactly how much each scenario is going to cost you - read carefully the terms of each contract, compare payments from different leasing and finance companies, and always negotiate if you want to rent or buy a vehicle.