Leasing vs. Buying a New Car
Our employees are frequently asked by customers (and even their own friends and family!) whether leasing vs. buying a new car is better, and which has greater benefits. It is a tough decision to make as both options have their pros and cons. For instance, leasing has lower monthly payments, while buying typically has higher monthly payments, though you own the vehicle in the end. Continue reading to learn about the advantages of leasing vs. buying a new car.
Leasing vs. Buying a New Car
Advantages of Leasing a New Car
- Your factory warranty will not expire, as you will only have your leased vehicle for a few years max.
- You will be able to drive the hottest car on the market, and have the latest tech and innovations.
- You will be able to drive a new car on a frequent basis thanks to the fact that leasing is short-term.
- Leasing offers attractive finance and interest rates.
- Lease payments are almost always lower than loan payments. This is because you are only paying for the vehicle’s depreciation during the lease term plus interest charges, taxes and fees.
- The future value of the vehicle does not affect you financially.
- You will have a simplified vehicle return at the end of your contract. All you have to do is return the vehicle at the lease end and pay any end of lease costs, then you are free to walk away. You also have the option to finance the purchase of the vehicle for the residual value, or browse the dealership’s lot to lease or buy another one.
Disadvantages of Leasing a New Car
- You do not own the vehicle, so you must return it at the end of the lease agreement.
- You do not have any equity in the vehicle, since you do not own it.
- Most leases limit the number of miles you may drive, often 12,000-15,000 miles per year. There are charges for exceeding the limit.
- If the vehicle’s interior has exceeded normal wear and tear, then you will be charged when turning it in.
- You must pay for vehicle damages to be fixed, or file an insurance claim and pay a deductible.
- The vehicle must be returns in salable condition. If you have modified it or added custom parts, they have to be removed.
- If you end the lease early, those charges can be costly. On occasion, the dealership may buy the car from the leasing company as a trade-in, freeing you from the contract and early termination fees.
Advantages of Buying a New Car
- You own a vehicle as one of your assets, plus you can keep it for as long as you want.
- You can sell or trade in your vehicle at any time convenient to you. If necessary, you can use the money from the sale of the vehicle to pay off a loan balance.
- Though the vehicle will depreciate, the equity value is yours to use as you wish.
- You are free to drive as many miles as you want without any annual limits. However, keep in mind that higher mileage lowers the vehicle’s trade-in or resale value.
- You do not have to worry about any wear and tear above normal. However, the condition of your vehicle greatly affects the vehicle’s trade-in or resale value.
- The vehicle is your’s to modify and customize how you like, but it is important to check with the manufacturer in regards to your warranty.
- At the end of the loan term you will have no further payments, plus you will have built equity over this time to help pay for your next vehicle.
Disadvantages of Buying a New Car
- The biggest disadvantage of buying a new car is depreciation! According to CARFAX, the value of a new vehicle can decrease by more than 20% after the first year of ownership.
- There are high upfront costs with buying a car. This includes the cash price or down payment, taxes, registration and additional fees.
- Loan payments are usually higher than lease payments. You have to pay off the entire purchase price of the vehicle as well as interest, finance charges, taxes and fees.
- You will have to deal with the hassle and sometimes stress of selling or trading in your car.
If you have any further questions about leasing vs. buying a new car, please do not hesitate to reach out to us. Our knowledgeable sales team can answer all of your questions or concerns, and help you make the best decision that meets your needs. Contact us today or come visit our dealership located in the Roseville Automall.