Leasing vs buying a car — it’s a tough choice that many people will go through at least once or another. The idea of driving the latest model at a much lower monthly price can be tempting for almost anyone, and then in the back of your mind, you start to think, “wait, but I won’t own it. What would that mean?” So, we decided the time had come to talk about how to lease a car, what it entails, and weigh the pros and cons of both options.
How Does a Car Lease Work?
A car lease works like any other, allowing you to “use” the vehicle for a set time and a set price — with the addition of a set number of miles. You’re paying to use the car for whatever period the lease stipulates. Those payments are often much cheaper than buying the car outright, as you only pay a percentage of the total price. It’s usually based on the projected depreciation value of the car over the lease term.
How Long Are the Lease Terms?
The length of the lease terms will vary, but they usually range anywhere from two to five years. Understand that shorter leases on new vehicles come with one major advantage. It will be under warranty for the entirety of the lease. That means the out-of-pocket expense will be minimal should you ever need to bring the car in for repairs.
What Happens at the End of a Lease?
What happens at the end of a lease is entirely up to you, but you’ll be faced with one of three options. You can return the vehicle and walk away — paying for any extra mileage, wear-and-tear above normal usage, and a disposition fee, which would’ve been agreed upon at lease signing. Or, you can turn in the vehicle and start a new lease, which often comes with incentives. And last but not least, you can buy your vehicle. Typically, you’ll enter into the lease knowing how much the car will cost if you choose to keep the car at the end of the lease term.
What If I Get into an Accident?
If you were to get into an accident, you’d treat it like you would with a car you owned. Contact your insurance company, get the repairs done, and continue driving the car until the lease ends. The only issue would be if you totaled the car. Then, the lease would end before the term, and you’d be on the line for any termination fees.
What Are the Pros and Cons of Leasing a Car vs Buying a Car?
There are advantages and disadvantages to leasing a car, and there are just as many advantages and disadvantages to buying a car. It depends on the individual, honestly. The advantages of leasing:
- Lower monthly payments
- Under warranty, if leasing new
- Drive the latest model of vehicles
- Drive a higher-priced, better-equipped vehicle
- Latest safety features
- Enjoy the newest technology available
- Depreciation protection
- Return vehicle at lease-end
The disadvantages of leasing:
- Paying for the car when it is rapidly depreciating
- Monthly payments continue if you continue leasing
- Mileage restrictions
- Potential wear-and-tear charges
- Termination fees if you end the lease early
- Warranties don’t usually cover the tires
- Paying a disposition fee at lease-end
- You don’t own the car
As we said, buying a car often has just as many advantages (and disadvantages). So, let’s start with all the plusses of buying a new car:
- Build equity with monthly payments
- No mileage restrictions
- No worry about wear-and-tear costs
- Keep the vehicle as long as you want
- Sell or trade whenever you want
- A customization is always an option
- No monthly payments at the end of the loan
The disadvantages of buying:
- Higher monthly payments
- Potential for hidden fees
- Depreciation
- More upfront costs
- Costs go to you after the end of the warranty
Leasing vs buying a car — the decision is ultimately up to you. Just take the time to consider the pros and cons of both before entering into any kind of agreement. The decision must make sense of your circumstances. Don’t just focus on the monthly payments, which is one of the biggest mistakes people can make when buying or leasing.
If you’d like to discuss your options, contact us today. A team member would happily sit down with you to discuss a lease or a purchase.
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