Here’s what you should consider.
If the thought of negotiating a deal for your next vehicle turns your stomach you are not alone. Or maybe you love doing endless research and then ‘working’ yourself a good deal. Whether you look forward to the experience or loath it, buying a car has become a necessary evil for most Americans. Once you determine it’s time to stop test driving and move forward, you’ll be faced with the decision to buy or lease. Here are some pros and cons to each:
Buying – Pros:
Length of Ownership – Many people who buy take out a loan for several years. Each year you hold the car after the loan is paid gives you the opportunity to save the amount of the monthly payment or put it towards something else.
Miles Allowed –You don’t have any restrictions on miles per year when buying. Of course, high mileage could negatively affect your trade-in value in the future. This is the way to go for those dealing with a long commute.
Complexity – The major variables are pretty straightforward when buying. Just don’t forget to factor in the sales tax when estimating your payments.
Buying – Cons:
Monthly Payment – It typically costs more each month to buy a new car over leasing one.
Repairs – Pay attention to the length of the vehicle warranty in relation to the term of your loan. The last thing you want is potentially costly repairs on top of your loan payments.
Trade-Ins – There is nothing worse than taking good care of your vehicle only to get a low-ball offer for it in a trade. This is probably my least favorite part of owning a car and can be a painful reminder that cars are not a good investment!
Lease – Pros:
Length of Ownership – Most leases are about 3 years long. If you are ready to drive something new you can move on after just a few years.
Trade-Ins – You can simply return the car at the end of the lease (or sometimes earlier) to the dealer and start over.
Repairs – Most leases run for the same length of time or less than most new car warranties. Some manufacturers even cover the basics like oil changes during the lease period.
Lease – Cons:
Monthly Payment – Even though it typically costs less each month to lease compared to buying, if you keep leasing you’ll always have a car payment.
Miles Allowed – Most leases call for a limit of 10–15,000 miles per year and it will cost you dearly if you go over. It would cost you $200 for every 1,000 miles over the limit if the charge is $0.20 per extra mile.
Complexity – There are a lot of factors baked into a lease payment including the residual value, taxes, interest and depreciation to name a few.
Generally, if you tend to buy cars and hold them for more than a few years you should consider buying. If you want to drive a new vehicle every few years and don’t mind always having a payment, leasing is probably a good fit.