Q & A: Should I Lease or Buy a New Car?

If you are in the market for a new car, chances are you have at least contemplated the decision between leasing a car and buying. New vehicle leasing is a relatively new concept, and has improved greatly over the past several years. Deciding whether to lease or buy your next new car isn’t always an easy choice to make - and depends heavily on your personal preferences and financial situation.

QUESTION: What are the Benefits of Leasing a New Car Over Buying?

Answer

Let’s explore some of the key differences that might make leasing seem like the better option, over buying.

• New Cars Only: When it comes to leasing a vehicle, you will always be driving the latest model year of a brand new car. It’s very rare that you will be able to lease a used car, with the exception of some high-end luxury used car leases that are sometimes available to lessees. If you are the driver who loves that new car smell, leasing is definitely a viable option.

• Lower Monthly Payments: Monthly lease payments are always lower than monthly loan payments on a new car. Typically, someone who purchases a new car will pay 60% to 110% more, than they would if they leased the exact same vehicle.

• No Major Repair Costs: One of the most compelling reasons to lease a new car rather than finance, is major repair risks. Drivers who opt to lease, will always be driving a car under the manufacturer’s warranty. Aside from routine maintenance like oil and filter changes, lessees won’t be responsible for footing any major repair bills.

• Pay for What You Drive: When you lease a vehicle, you are only responsible for paying the portion of the vehicle you actually use. This is determined by calculating the difference between the MSRP of a new car and the expected depreciation value over the term of your lease agreement. Drivers who opt to finance a car, are responsible for the entire worth of the car - regardless of how long they intend to keep it.

• Optional Down Payment: Drivers who aren’t able to put down the necessary amount of money on a new car, can skip the down payment entirely with a new vehicle lease. Lessees pay only sales tax on monthly payments, and a financial rate that is comparable to the interest on a traditional auto loan.

• First Payment Due at Signing: Most lease agreements specify that the first payment on a new car lease is made at signing. For individuals who opt out of a down payment, will only owe the amount of their first payment at signing - and nothing else until the next month’s payment is due.

QUESTION: What are the Benefits of Buying a New Car Over Leasing?

Answer

Just as leasing has its own set of perks, so does purchasing a new car. Take a look at some of the benefits associated with traditionally financing a vehicle, rather than leasing one.

• Keep it Longer: Buying a new car is a great option for drivers who tend to hold onto their vehicles for as long as possible. Because leases expire on average after three years, drivers who lease usually don’t keep the same vehicle for an extended period of time.

• You Own the Car: After you finish paying the loan on your car, you own it outright. This means, that aside from feeling accomplished, you will have no monthly car payment to worry about for the foreseeable future. The only costs associated with your vehicle once it has been paid off, are basic costs of ownership.

• No Mileage Restrictions: As the owner of your vehicle, you won’t be held to annual mileage restrictions that drivers of leased vehicles must adhere to. Drivers with long daily commutes or who enjoy taking extended road trips, won’t have to worry about penalties for going over arbitrary limits.

• Modifications are Allowed: For drivers who enjoy working on their vehicle, want to modify it for off-road adventure or upgraded styling aesthetics, are free to do so when they purchase a car outright or through traditional financing. Drivers who lease a new car don’t have that luxury, and will more than likely face monetary penalization if they make any permanent changes to the leased vehicle.

• Down Payment: Some buyers may look at the necessity of a vehicle down payment as a negative to purchasing a new car. While coming up with a lump sum of cash to secure your new car may not seem enticing, buyers who are able to do so will end up with lower monthly payments.

Figuring Out Which is Right for You

Exploring the differences between leasing a new car versus buying a new car, is the best way to determine which option is right for your situation. While many car shoppers want a quick answer - a concrete reason why leasing is better than buying - it’s really not that simple. As you can see, there are plenty of reasons why each option is beneficial, and those reasons resonate with some shoppers, more than with others.

Before deciding which option is the right one for you, take the time to evaluate what you need in a new car, as well as your budget, and personal preferences. While leasing has earned somewhat of a negative reputation over the past few decades, new laws and regulations make it a more popular and viable option than it ever was before.

Whatever you do, don’t simply listen to the opinions of others to sway your ultimate decision. The choice between leasing and buying a new car is a very personal one, and is a decision that should not be taken lightly. Many car shoppers who are on the fence between leasing a new car or buying one, have found it helpful to write out a list of pros and cons for each option, and weigh how each factor affects their individual needs and lifestyle.

Regardless of which route you take, proper due diligence and forethought can go a long way in making the choice that is right for you and your family.