If you're in the market for a new car, you've probably thought about this question. You might have heard that it's not a great idea to lease cars, but that's not the full story. Believe it or not, there are legitimate reasons why leasing a car might be in your best interest.
In this article, let's break it down and see what might work best for you.
Should You Buy or Lease a New Car?
Buying a Car
When you buy a car, it's exactly how it sounds: You own it outright. It's yours and nobody can take it away from you (not without a police report, anyway). You pay the full price of the car, either upfront or through a loan, and it's all yours.
Yep, you get to keep it as long as you want. There's no worry about mileage limits or extra fees for wear and tear.
The biggest advantage of buying a car instead of leasing it is…it's yours. When you're done paying off the car, it's 100% yours. It becomes an asset. It's like crossing the finish line of a race and getting the winner's medal – you have a car without monthly payments. Plus, you can customize it however you like – fuzzy dice, anyone?
Another thing to consider is that you can sell the car whenever you want. Need an upgrade? Want a change? You're in control. And remember, you're building equity – that's like saving up money in your car's piggy bank. The longer you keep it, the more it could be worth when you decide to part ways.
Leasing a Car
When you lease a car, you rent it for a set period of time – usually a few years. You'll make money lease payments each month until the end of the lease. When the lease is up, the car is no longer yours. You must return the car, requiring you to lease (or buy) another car.
There are pros and cons to leasing cars. The nice thing is lease payments tend to be lower than if you bought the car with an auto loan. And you won't have to worry about maintenance on the car as it gets older because you would have already returned it.
You're basically paying for the car's expected depreciation during the lease time. And when the lease ends, you can simply return the car and walk away without having to sell it or trade it in.
Leasing also means you can often drive a newer car with fancier features without shelling out a massive down payment each time you lease a new one. And if you're someone who likes that new car smell, leasing might be your jam. Every few years, you get to hop into a shiny new ride.
But that doesn't mean leasing a car doesn't come with its own drawbacks.
Things To Consider
Okay, now for the nitty-gritty – how to choose?
It really depends on what's important to you. If you're all about long-term commitment and building equity, buying might be your match. It's like finding a partner for life – you're in it for the long haul.
But if you're more into changing things up and having lower monthly payments, leasing could be your dance partner. Just remember, there are often mileage limits with leases, so if you're planning many road trips, that's something to keep in mind.
In addition, understand that when you lease cars, you will never truly own one. This means you'll never have a car that's an asset. They will all be liabilities because you don't own them.
Also, think about how much you drive. If you're a road warrior with a long daily commute, those miles could add up fast. Leases usually come with mileage caps, and going over could cost you. Owning might be a better route if you're putting a ton of miles on your car.
Is Buying or Leasing Right for You?
So, there you have it – the buy vs. lease showdown.
Both have their perks and quirks. One of the big perks of owning is that you're building something called equity. Think of it as money you're putting into your car's savings account. Over time, as you make payments and the car's value holds up, you're storing up value. So, if you ever decide to part ways with your four-wheeled friend, you can sell it and get some cash back. It's like making an investment in something that's both functional and valuable.
When you own, there's no need to worry about mileage limits. You can cruise wherever you want without stressing over how many miles you put on the odometer. That cross-country road trip you've been dreaming of? Go ahead and hit the gas – it's all good.
Another plus is that you can customize your car to match your style. Want a flashy paint job, after-market rims, or a personalized license plate? When you own, you're free to make your car a true reflection of you. It's like turning a blank canvas into a work of art.
Leasing, on the other hand, offers lower monthly payments, the chance to drive the latest models, and an easier way to switch up rides.
It's a bit like choosing between buying a house or renting an apartment – it's about what suits your lifestyle and goals. If you're all about the long run and having something to show for it, buying might be your cup of tea. But if you're into change and a lower monthly commitment, leasing could be more up your alley.
Remember, the road you take depends on where you're headed. Whichever path you choose, make sure it aligns with your financial journey and gets you closer to that richer retirement you're aiming for.
Steve Adcock is an early retiree who writes about mental toughness, financial independence and how to get the most out of your life and career. As a regular contributor to The Ladders, CBS MarketWatch and CNBC, Adcock maintains a rare and exclusive voice as a career expert, consistently offering actionable counseling to thousands of readers who want to level-up their lives, careers, and freedom. Adcock's main areas of coverage include money, personal finance, lifestyle, and digital nomad advice. Steve lives in a 100% off-grid solar home in the middle of the Arizona desert and writes on his own website at SteveAdcock.us.