Are you in the market for a new car? Aside from looking at new or preowned vehicles, you can also choose to lease a car. The debate between leasing or buying a car is common when shopping for a vehicle because both options offer unique advantages. Weighing the pros and cons is the best way to determine the right option for your budget and driving needs. Compare these advantages and disadvantages to determine whether you should lease or buy a car.
Leasing a New Car
Leasing a car has become an increasingly common alternative to purchasing a car. Leasing a car involves making monthly payments to drive a car for a set term. At the end of the lease term, you return the car to the dealership. Consider the pros and cons of a leased car to help determine if this is a good option for you.
Pro: Covered Maintenance Costs
Most lease terms include comprehensive warranties that cover common maintenance costs like oil changes. If unexpected issues arise, the lease warranty typically covers the costs. For example, if you take your leased car back to the dealership you got it from, they'll honor your warranty and change your oil free of charge.
Pro: Get a Better Car Than You Could Afford
Many people love leasing cars because they can lease newer cars than they could finance. Since leases typically last two or three years, you can take advantage of the latest safety features, technology and styles, which would typically cost much more to buy.
Pro: No Worries About Selling or Trading
Since you return a leased car to the dealership after the lease term ends, you can avoid the stress of selling or trading the car when you're done. This also means the depreciating value is of no concern because the dealership takes the car back regardless.
Pro: Lower Monthly Payments
One of the biggest advantages of leasing a car is the lower monthly payments. Rather than having a high monthly payment and interest rate, leasing offers a more affordable way to shop for a car.
Con: Keeping the Car in Good Condition
While your lease contract accounts for normal wear and tear like small scratches, you need to keep the car in good condition while it's in your hands. If the car has excessive wear and tear beyond normal use, you may be charged extra upon return.
Con: More Expensive in the Long Term
When comparing costs over the long term, leasing is typically more expensive. If you pick up a new lease every few years, you'll always make payments without any chance of earning equity in the car. Since your monthly payments go on forever in this situation, you'll likely end up paying more.
Con: Mileage Restrictions
Another downside of leasing a car is that you're limited to a specified number of miles. While this may not be a concern for some people, you must be careful to avoid exceeding your mileage restrictions if you drive a lot. You'll get charged additional fees for every mile you exceed the limitation.
Con: Unexpected Extra Fees
If you're considering leasing a car, be sure you understand what extra fees may be associated with the lease. For example, there may be a service fee when you return the vehicle, fees for ending your lease early and other potential unexpected fees.
Buying a New Car
Buying a car involves getting a car loan from a financial institution or bank. Like other loans, you make monthly payments to the bank for a specified number of years. As you pay the loan, you build equity and eventually own the car after the loan is completely paid off. Be sure to consider these pros and cons of buying a car.
Pro: Full Ownership
The biggest benefit of buying a car is having full ownership of the vehicle. This option allows you to get more value out of the car. You can keep the vehicle for several years after it's paid off, which can be more cost-effective in the long run.
Pro: Modifying Your Vehicle
You also have the freedom to modify your vehicle however you want. For example, if you want tinted windows or lifted tires, you can have them when you buy a vehicle. This allows you to make your vehicle everything you want it to be.
Pro: No Mileage Limits
Unlike leasing, you can put as many miles on your car as you want or need to. Since you own the car, there are no restrictions or limits. Purchasing a car is often ideal for drivers that put a lot of miles on their cars per year.
Con: Upfront Payments
Car buying is associated with several upfront payments, including a down payment, sales tax, dealership fees and more. Depending on the car, how much you're putting down and how much the dealership charges, these upfront costs can be costly.
Con: Higher Monthly Payments
Financing a car can be more expensive from month to month. Your monthly payments are generally higher because you also pay interest on the loan. The higher the price tag and the lower your credit score is, the higher your monthly payment will be.
Con: Covering Maintenance Costs
Buying a car also means you're responsible for covering maintenance costs. Maintenance costs can vary significantly depending on a car's age and how well you care for the vehicle. Regardless, you should anticipate covering these costs yourself.
Should You Lease or Buy a Car?
When comparing leasing vs. buying a car, you have much to consider. Neither option is better nor worse than the other — it ultimately depends on your situation and car needs. The three biggest factors to consider are your budget, how often you drive and how often you want a new car.
Leasing may be for you if you have a smaller budget, want to drive a new car every few years or don't drive a lot. Buying may be better for you if you prefer to have more control over your vehicle and can afford higher payments.
Stay Safe in Your New Vehicle With AAA
Whether you plan to lease or buy a new car, AAA can help you stay safe on the road. Protect yourself and your car with our various automotive services like auto insurance, roadside assistance and auto repair locations. AAA members have numerous benefits that go beyond vehicles, including discounts and rewards. Find a membership level that suits your needs, or learn more about AAA memberships.