When it comes to understanding your finances and making smart purchasing decisions, there's a lot you need to know. We're passionate about helping our members better understand their finances so that they can feel secure and informed about their decisions.
Leasing vs. Buying a Car
A lot of things factor into the decision of whether to lease or buy a car. It’s important to understand the advantages and disadvantages of both so you can make the best decision for you.
Leasing a Car
- When you lease a car, it usually means you’ll have a lower down payment than when you buy — leaving you funds you can allocate to other places of need.
- Depending on the type of car you lease, it usually means you’ll have lower monthly payments than if you owned.
- Leasing a car is typically an easy transaction. When it comes time to trading it in, there’s usually little hassle involved, assuming the condition and mileage of the car fall within the terms of the lease.
- You’ll always drive a new, or nearly new, vehicle.
Buying a Car
- Most car leases allow specific mileage restrictions during your leasing term. Exceeding these may result in a penalty.
- Leasing typically means you’re not working toward ownership, so you aren’t building any equity.
- Lease terms usually run two to four years. If for any reason you need to get out of your lease early, it will cost you. You’ll typically have to pay the remainder of the lease and any additional early termination fees.
- Some insurance plans don’t fully cover the market value of a leased car. For additional coverage, you may have to get additional insurance.
- Owning a car means there are no limits on how much mileage you put on it.
- It also means that eventually you won’t have any payments.
- Owning a car means you can customize it however you want. You can add a new stereo, add custom detailing or make any other change you wish.
- When you own a car, you don’t have to sweat the occasional stain, dent or scratch occur, because you won’t be charged for it.
- Typically, monthly payments are larger if you own as opposed to lease.
- To buy a car, you typically need to have saved money up front for your down payment.
- Unless you own an exotic or high-end luxury car, your car probably won’t appreciate in value over the course of ownership.
- Since you’ll likely own a car longer than you lease one, you may eventually incur large and costly maintenance expenses.