September 29, 2017
In a world where black and white answers are valued, the decision to buy a car or lease a car occupies a vast world of gray. There is no correct choice and there are several clear advantages to each option. However, depending on your circumstances, one option may stand out as being slightly more beneficial to you personally. Let’s take a look at the pros and cons of buying a car versus leasing a car to help you decide which path is the best.
+Flexibility:If you like to change cars every few years, or perhaps even more frequently, then leasing gives you the ability to follow your whims more easily.
+Short Term Financial Gain:Those who lease a car pay $0 down and make smaller monthly payments than those who buy. Consequently, from a short-term perspective, you keep more money in your pocket.
+Lower Repair and Maintenance Costs:Similarly, when you lease a car, its maintenance and repair costs are covered. This even includes basic maintenance like oil changes, brake pads, and more.
+Better Car?Because out-of-pocket costs for leasing a car are lower, you can afford more – whatever “more” happens to mean for you. You can drive something bigger, more expensive, or more powerful for less money now.
-You Don’t Own It:Because you don’t own the car, you cannot customize it. Sadly, you also cannot keep the car when the lease ends, although choosing to buy it is always a possibility.
-Financially Worse Over Long Periods:A lease is only financially beneficial for a short duration. Continuing to lease various cars for extended periods of time, particularly beyond five or six years, translates to lost funds in the end. You also can never re-sell the car.
-Leases are Tricky:Unlike buying a car, which is more straightforward, there is legal jargon associated in most car leases that may be confusing or binding. There are often mileage limits to a lease as well, typically 12,000 miles per year. Attempting to end a lease prematurely can be a hassle, and violating terms of the lease will result in financial penalties.
+Ownership:You own the car. You may do with it as you please. Similarly there is no lease or legal jargon restricting you to certain behaviors.
+Long-Term Financial Gain:If you are actively concerned about improving your long-term financial outlook, and you plan to own your car for a while, then buying is the wiser financial option. In most cases you will pay off the car within five years and no longer have a payment.
+Selling: When you own something, you can sell it too. Those who own their car always have a lingering payday in the distance. And they funds from selling a car are generally significant.
-It Costs More NowBuyers must front the cost of a down payment and also cover the state sales tax. These are two hassles that those who lease avoid completely. Perhaps most importantly of all, buyers also pay higher monthly payments, which can be disconcerting.
-Repair and Maintenance Costs:Unlike leasing, owning a car requires that you pay for all repair and maintenance costs unless otherwise specified in a warranty. If something goes horribly wrong with your car, this could become very expensive.
As a general rule, if you are committed to driving a car for five years or more, and if you can afford the higher monthly payments, then owning is the right choice for you. Conversely, if you are feeling non-committal, and if lower out-of-pocket costs and lower monthly payments are a significant enticement to you, then leasing is probably the right choice.
Still undecided? Contact Dick Hannah and we’ll have a dedicated financial expert help you choose the best option based on your finances and driving preferences.