What's the difference between buying and leasing a car
You are in the market for a new set of wheels, but you are unsure about whether you want to go the own or lease route. There are positives and negatives to both options, so it is important to find the one that is best suited to you and your needs.
Buying a car
When buying a vehicle, you will typically get a car loan, and pay it off over time, or you can buy it outright with your own funds. Either way, the car is yours to keep and do with what you wish.
- The car is yours, so you do not have to give it back after a set about of time, or pay any additional end of lease fees.
- As the vehicle is yours, you are free to sell it or trade it in at any time.
- While the value of the vehicle depreciates, it’s cash value is yours to do with that you wish.
- You are able to make changes or modifications to the vehicle as you see fit (permitting they are street legal and approved by your insurer).
- When buying a car vehicle, you need to be prepared to make a down payment. The more sizeable, the better.
- Payments are often higher on car loans, as you are working towards paying off the value of the vehicle in its entirely.
Leasing a car
Leasing a vehicle, means that you essentially pay to borrow the car for a set amount of time. The terms of a lease are determined much like a car loan, and when the term is over your payments end and you return the vehicle.
- You are not tied down to one vehicle. After the term of your lease is over, you are able to switch to another if you wish.
- You can typically only lease new vehicles. So you get to drive around a fresh car.
- You have the option of buying the car after your lease is over if you wish. You can buy the vehicle with peace of mind knowing that you are the only one to have driven the vehicle at the time of sale.
- Lease payments tend to be cheaper than car loan payments. With a lease you are paying for the depreciation for the vehicle, with a car loan you are paying off the entirety of the vehicle.
- Pay a much smaller down payment on the vehicle than you would if you were buying it.
- The cost can escalate higher than you may have realized. When you lease a car, you sign on to a certain amount of mileage. If you go over that mileage, you are charged additionally at the end of the lease.
- If you wish to exit your lease early, there are hefty fees that are associated in doing so.
- As the vehicle is not yours, and you are not making payments towards the vehicle itself, you gain no equity.
- You could be charged at the end of your lease for any “excessive wear and tear” that took place during your term.
- Aside from unavoidable wear and tear, the vehicle must be returned in its original condition. This prohibits your from making any modifications to the vehicle.
The take away
So, after looking at both buying and leasing a vehicle, does one come out on top of the other? Unfortunately, there is no black and white answer to that, it depends on the individual. As noted above, there are pros and cons to both options, and it comes down to your individual needs when with comes to your vehicle.
If you do not put many miles on your vehicles and enjoy switching them up every few years, then leasing may be for you. However, if you wish to see the equity on your vehicle, and be able to call it yours, chances are you’ll want to own your vehicle.
Like with any big purchase, it is important to look at the benefits of all options and analyze your needs.