Is It Smarter to Lease or Buy a New Car?

Those who are hunting for a car will often find it difficult to choose between the process of buying and leasing a new vehicle. Buying comes with a higher mortgage, but you have the ownership of this asset. Those who choose to lease a car will have a lesser monthly payment, but it gives you a chance to drive a high-end vehicle that you should not be able to buy. So, which is better, lease or buy a new car?

What is Better Lease or Buy a New Car?

A new vehicle could be one of the most significant purchases you will make in this life, apart from your real estate purchase. Whether financed or leased, vehicles are considered a typical cost of American expenses. Weighing the benefits and disadvantages will help you determine if it is best to lease or buy a new car.

Leasing My Car

When you plan to lease a car, you are basically paying only for the right to use the vehicle for a particular period. Usually, this will last for about 3-4 years. Most of the lease will go through a dealer financing option. The amount you pay will be a fraction of the car’s market value. It will cover the number of related fees and taxes. You will be obliged to make a monthly payment through the lease contract duration that will cover the vehicle’s depreciation rate. Also, you will be required to pay additional fees if you return the car in a not-so-excellent condition. It is a good thing to consider in determining what is better, lease or buy a new car.

The Benefits of Leasing My Car

Is it smarter to lease or buy a new car? When looking at only the superficial aspects, leasing a car could be the better option.  It comes with a lower monthly payment since you will not be paying for the principal. Instead of possessing the vehicle, leasing is based on the concept of borrowing the car; you will only be required to pay the difference between the current market value of the vehicle and the expected value by the time that the lease period ends. It will also include the cost of finance.

• You will enjoy the car in its most optimal state.
• You will be driving the latest vehicle model that is often covered by the warranty.
• Usually, the lease will come with free maintenance and oil change.
• The vehicle is better equipped with features and has a higher market value than the vehicle you can easily afford.
• Your vehicle will possess all the latest safety features.
• You don’t have to be constantly anxious about the fluctuations in the car’s trade-in value. You will also avoid all the hassles of selling this when looking for an upgrade or replacement.
• It comes with tax advantages.

What Are the Disadvantages of Leasing?

While leasing could be the choice of many when choosing which is better, lease or buy a new car, there are also some drawbacks to it. Here are some of its shortcomings.

• By the end of the contract, you will realize that leasing could cost you higher since you will be paying for the car’s value when it is depreciating fast.
• The monthly payment can feel endless, especially if you quickly replace your leased car. Be sure to get the most out of it by possessing it for a longer duration. If you plan to keep the vehicle until it is no longer economical to fix it, you will realize that buying is cheaper.

• The lease contract will come with a particular mile limitation. Once you go beyond that limitation, you will be charged for the excess mileage. The cost may start at 10 cents and can swell to 50 cents per added mile. Be sure to consider how much you are planning to drive when choosing a lease.

• If you can’t keep this car in excellent condition, you will also be charged for the vehicle’s wear and tear by the time you turn it in. It may not be the perfect choice if you have some rowdy kids or if you are a magnet of dings and dents. Think about this factor to identify if it is best to lease or buy a new car.

• It will cost you if you can’t handle the monthly payment. You need to settle penalties and termination fees if you want to get out of the lease agreement. The cost you need to pay will almost be equivalent to the lease amount during the whole term.

• You will be required to return the vehicle ‘as is,’ which means that any configuration is equivalent to extra charges.

Buying My Car

Those who choose to purchase a car means that you will be the owner of the vehicle instead of choosing to lease it for a couple of years. If you prefer a new car, be ready for the premium upfront cost. Based on the 2020 reports, the cost of ownership is almost $38,000. You have a more affordable choice, such as opting for a used vehicle. Also, you will have to consider the entire cost of possessing the car and not just the vehicle’s price tag when choosing which is better, lease or buy a new car.

What Are the Benefits of Buying a Car?

If you plan to possess the cars until it is beyond repair, this will seem to be a better choice. When you want to determine if it is best to buy or lease a car, you should ask yourself how long you plan to keep it. You want to make sure that you will take advantage of its usability. Here are more benefits of purchasing a new car.

• No Mileage Limitations- Since you own the car, there will be no mileage restrictions listed on the agreement. If you plan to keep it to 100,000 miles per year, or you want to take it for an out-of-state adventure, you are free to do so without being anxious about the added fees.

• No Charges on the Wear and Tear- Apart from the missing mileage restrictions, you will not be charged on what the dealership thinks is the standard wear and tear. The need to settle the amount for potential repair is the common concern of car shoppers opting for a lease. Carefully consider this when choosing which is better, lease or buy a new car.

• Trading or Selling Your Vehicle- Some people will think that the whole process of selling or trading your car is a complex and daunting process. Therefore, they try to avoid this as much as they can. However, the amount that you can rake in for selling your old car can be used to pay for your new vehicle’s upfront cost.

What Are the Disadvantages of Buying a New Car?

While the benefits we’ve listed above can make this option more tempting, you should also consider the different drawbacks of buying your new vehicle. It will help you find the answer to the question is it smarter to lease or buy a new car.

• Maintenance Cost- When buying a car, you should not simply think about the price of the vehicle. There are different costs associated with it, such as the maintenance cost. While it may feel good that you own this asset, you will also have to prepare to shoulder the expenses when you need to fix them.

• Higher Upfront Cost- The down payment for a purchased car is expectedly higher than when leasing a vehicle. By increasing your down payment, you will have a lower monthly price. However, it would be best to prepare since it will take a big chunk out of your savings.

• Monthly Payment- The monthly mortgage for buying a car is higher than leasing a vehicle. For instance, let us look at the Grand Cherokee. When leasing this vehicle, the average monthly payment is around $159, while owning it will come with a $637 monthly payment.

Comparing What is Better Lease or Buy a New Car

We’ve already discussed the difference between leasing and buying a car. However, that may not be enough to help you decide if it is best to lease or buy a new car. Let us look at some of the areas where they differ.

Payment

We’ve mentioned above how the monthly payment of leasing a car is lower than buying a new car. It will also be more affordable if you choose to purchase your vehicle through the standard car financing options in the market. Understand that the lease payment is based upon the presumed depreciation rate of the vehicle through the duration of the lease and not on the overall market value of the car. Payment is one factor to think about to determine if it is best to lease or buy a new vehicle.

Ownership

People who choose to lease a vehicle will choose a more premium car than they could afford if they decide to buy a new car. A lease period will often be active for 2-4 years. Once the lease expires, you will be qualified to sign a new lease for the latest model of the car. Therefore, you will not handle the time-consuming and stressful sales process. You can immediately drive your new vehicle and let the dealership handle the sales.  On the other hand, you don’t have to give up your new car, if you choose to buy it. You can trade it into a dealership or sell it to a private individual. Ownership could be a deciding factor to help you realize which is better, lease or buy a new car.

Warranty

The leased vehicle is still within the manufacturer’s warranty. Therefore, it should not require anything more than regular maintenance. You may not have to think about the mechanical failures since the warranty adequately covers you. If you choose to buy it, the warranty will also protect it but only for a specific period. Nonetheless, you still have the option to avail of the extended warranty. Once it reaches its expiration period, you will have to shoulder the cost of the repairs.

When Is Buying the Right Choice?

If you want to have control over the cost, buying could be the best solution for you. When buying a car, you make the monthly payment to own the vehicle. Once you repay the loan (which typically lasts for 4-6 years), you are free on the monthly fee and have an additional asset, the car. You can then choose whether to sell it or trade it for a newer model. It will have a higher resale value as long as this is in pristine condition. Consider this when choosing which is better, lease or buy a new car.

Those who love to customize their car will also find the buying option a better choice. You are free to do whatever you think of with your vehicle since you are its owner. You will not be scared that you will incur additional fees. It is a better option for those who plan to drive their car for miles. If you plan to use the vehicle to its maximum usability and take care of it properly, it is highly unlikely that you will have a financial loss in this investment.

When is Leasing the Better Choice?

Leasing is an excellent option for those who want a lower payment every month. People who don’t want to worry about fixing the car will also be inclined towards leasing a vehicle. If you don’t want to be frustrated about the occasional mechanical failure as soon as the warranty expires, then leasing is your answer. Excessive mileage can also affect the value of your car, and you will also be responsible for handling all the sales and trade-in processes. Some people will avoid going through all the hassles of it.

Choosing which is better to lease or buy a new car could be a serious decision. You will need to make several calculations, compare the payments, and understand the standard terms. Whether you plan to buy or lease a car, know that it is always best to negotiate things with your dealership.