Car Dilemma: Lease or Buy?

If you’re in the market for a new car, one of the first things to think about is whether you’d like to buy or lease a new vehicle. Both options will come with their own financial obligations, so one isn’t inherently better than the other. The “right” choice for you depends on your lifestyle, driving habits, and finances.

What Does It Mean to Lease?

Leasing is similar to renting. When you lease a vehicle, you are making an agreement to pay a monthly rate to drive a car that you will eventually return at the end of your leasing term. Because you don’t own the leased car, your monthly payments will usually be lower compared to the monthly payments you’d make from buying that same model. If you want to continue driving your leased car, you may be able to buy it at the end of your term agreement if the dealership provides that as an option for their lessees.

What Are the Benefits to Leasing?

Along with lower monthly payments, leasing can eliminate the financial burden of vehicle ownership. Because leased cars are usually newer models, unexpected breakdowns are rare, so you won’t be on the hook for major repairs. Also, leased vehicles are often covered under the manufacturer’s original warranty. However, this often means you will be restricted to a mileage limit for the duration of your lease, though you can negotiate for a higher mileage allowance in exchange for a higher monthly payment. Another benefit of leasing is that you will have access to the latest models with the most updated safety features available on the market. If you are someone who enjoys the feeling of driving a newer car, leasing allows you to sustain that feeling long-term as you cycle from one lease to the next.

What Are the Benefits to Buying?

Buying a car enables you to retain the value of that car after your loan has been paid off, especially if you have kept up on maintenance and repairs. Even if you don’t sell your car, you can continue driving it for many years and save hundreds of dollars every month. As the vehicle’s owner, you’re also not subject to the limits that come with a car lease. Most leases will require you to return the car in its original condition with the appropriate amount of miles on the speedometer, minus some reasonable wear and tear. Going over the mileage limit or returning the car with scratches and dents can result in costly penalty fees that outweigh the benefits of leasing in the first place. Due to this, buying a car might be the better option for people who enjoy weekend road trips, do a lot of daily driving, or expect to produce a lot of dings and dents with their driving habits.

Who Would be the Best Fit For a Lease?

Leasing is ideal for people who prefer driving new cars and wish to avoid the long-term financial commitment of owning a car outright. Because of mileage restrictions, it’s also best for low-mileage drivers. The penalties for breaking a lease can be very high, so leasing candidates should have relatively good credit and a stable income.