Car commitment: buying vs. leasing
When it’s new-car time, money’s a big factor. So when it comes to buying or leasing, which route is best for you?
If you plan to develop a long-term, deep, emotional bond with your car, buying is generally considered a better way to go. But if you’re the love-‘em-and-leave-‘em sort, trading up for a newer model every three or four years, leasing could be better for you.
The essential difference between buying and leasing is that those who purchase a vehicle will own it free and clear after their loan is paid off. On the other hand, people who lease their car may enjoy a lower monthly payment, but will have no tangible benefit after their lease expires. Both camps have their pros and cons. Many experts agree that it’s essentially a personal preference whether you’d like to own the car one day or experience the excitement of driving a new vehicle every few years.
So let’s talk shop:
The pros of buying.
- You own the vehicle after your loan is paid off
- Insurance is typically cheaper (fast-and-furious drivers excluded)
- No constraints on mileage
- You can modify or equip your car to your liking
- Sell the car whenever you want
The cons of buying.
- May require a higher down payment than an initial lease payment
- Higher monthly loan payments
- Substantial depreciation costs
- You’re responsible for repair costs after the warranty expires
- Possible trade-in or selling hassles down the road
The pros of leasing.
- Drive a nicer car for a lower monthly payment
- Drive a new car every few years
- No depreciation worries
- No trade-in or selling hassles
- Lower or no repair costs — you’re always covered under the vehicle’s factory warranty
The cons of leasing.
- You don’t own the vehicle (although you’ll have an option to buy after the lease expires)
- Mileage is typically limited to an average of 12,000 or 15,000 miles annually (you’ll pay for excess mileage)
- Higher insurance premiums for leased vehicles
- Possible excessive wear-and-tear charges at the end of the lease (be careful with those chili dogs!)
- Penalties for early termination of a lease
Other special incentives, such as manufacturer rebates or end-of-year deals, could make buying a more attractive alternative. On the other hand, if you’ll use the vehicle for business, leasing may provide certain tax advantages. Consult your tax adviser for details.
So… ready to commit?