As polarizing as discussions on this subject tend to be, the reality is there are strong cases for both leasing and buying new cars. If you like to keep a car for years and years and years, buying will be your best way to go. If you’d rather always have cutting edge technology in your auto, leasing is a better play. Of course, there are other factors as well, so let’s take a look at how to know when it’s better to lease or buy a new car.
Why You Should Buy
As we mentioned above, the argument for buying primarily centers upon how long you tend to keep cars. Financially, you’ll come out ahead if you tend to drive your cars for ten years or longer.
However, you’ll pay more to take the car off the lot, you’ll also pay for maintenance and absorb the depreciation the car experiences. You’ll make a higher monthly payment too.
However, when all is said and done, you’ll own the car outright. Choose a car with minimal depreciation and the potential to become a collectable and you’ll have equity in the car when all is said and done.
Why You Should Lease
Turn everything above upside down and you’ll have the best case for leasing. You’ll pay less to drive the car off the lot. Your monthly payments will be lower and — given lease terms typically run concurrent to manufacturer’s warranties — you won’t pay for maintenance at all. You might have to buy tires, but that’ll be about it.
Depreciation won’t be an issue for you because you don’t have to worry about getting your money back out of the car. Moreover, you might still pick up some equity. You can sell the auto and keep the difference if the residual value turns out to be lower than the fair market value at the end of your lease. This money can then be used to seed your next contract. One more thing, you can write the payments off on your taxes if you’re using the car for your business.
Why You Shouldn’t Lease
The biggest reason people cite for avoiding leasing is strapping yourself onto a treadmill of eternal car payments. Meanwhile, that monthly obligation eventually goes away when you buy a car.
Other people will dictate the way you use the vehicle as well. All lease agreements include a stipulation requiring you to limit the accrual of mileage. You’ll typically be confined to 10,000 annually for luxury– and high-end sports cars. The cap is 12– to 15,000 a year for mainstream cars. You can buy additional miles up front, but you’ll have mileage limits to observe just the same.
Modifications that cannot be reversed are not permitted and you’ll consent to maintaining the car to the highest possible standard.
Why You Shouldn’t Buy
It takes considerably more money to initiate a purchase than a lease. You’ll also be locked into driving a lesser car because your monthly outlay will be higher. Or, said differently, that same cash — put toward a lease — will get you into a more extravagant automobile.
You’ll be offered next to nothing should you try to trade the car in at a dealership, which means you’ll have to sell it yourself to extract its true value. Moreover, the additional money you sink into buying the car could do more and better work for you invested in a profitable venture.
So, how do you know when it’s better to lease or buy a new car? Ultimately it comes down to what matters in terms of your money and your lifestyle. You’ll drive happy if you examine both and make your decision accordingly.