One of the oldest ongoing conversations in the world of cars is the lease vs. buy debate. There are passionate arguments on both sides of the debate, but what it really comes down to is your individual situation, and which approach would truly be right for you.
Buy vs. Lease
Thinking of leasing your next vehicle since the monthly payments would be smaller? First, understand that there is more to the cost of leasing a vehicle than just the monthly payments. At the end of your lease you can get hit with charges for any excessive wear and tear as well as going over your mileage allowance. There may also be an administration charge for the dealer to calculate all this for you. And if you need to break your lease agreement due to a change in your finances, there will be a fee for that too.
On top of all these hidden charges is the fact that, from lease to lease, you’re continually paying for the highest depreciation years of a vehicle. This means that someone else (who buys the car used after you are done with your lease term) benefits from the fact that you have already absorbed the years related to the highest amount of depreciation.
You’ll also have no equity built up as you do not own the vehicle. You can’t sell it for a little extra cash, and for some, that matters a lot.
If you’re concerned about the amount of your monthly payments, consider buying a 2-3 year old car. This will spare you the highest depreciation years, so that there is less of a chance that your loan won’t be worth more than your car. You’ll still have some warranty and the price, and therefore payments, are usually lower.
With the money saved, you’ll be able to fix any problems after the warranty expires and still come out ahead. Since you own the vehicle, you could also keep it longer. Getting a few more years out of it will save you even more money compared to a new car every three years.
But just because this scenario might work well for some, it isn’t always that answer. With a lease, you don’t usually have to worry about car maintenance; just bring the car in for regularly scheduled maintenance, and you are good to go.
Additionally, there are many consumers who like to have a new car regularly. The leasing process makes it easy to drive a new car for two or three years, and then turn it in and start driving a new car. As long as you are comfortable with the process, and as long as you are careful to read the lease agreement before you sign, a lease can work out quite to your advantage.
Think about what your car will be used for, and how long you plan to have it. In some cases, it makes sense to buy a slightly older, used car from a certified dealer. But if you have different priorities, and can afford it, you might consider leasing.