Should You Lease or Purchase a Vehicle?

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Deciding whether to lease or buy a car involves more than just finances. It’s also about your risk tolerance and how often you like to upgrade your ride. If you want to eventually own a car and avoid payments for a while, buying is the way to go. However, if owning a car isn’t a priority for you, leasing could be an option worth considering. In fact, according to Experian’s Q4 2022 report, about 26.45% of new cars last year were leased, with Hondas and Toyotas being the top choices. Although leasing has become less popular, dropping by over 17% since the pandemic, it still offers potentially lower monthly payments depending on your circumstances.

Before you decide what’s best for you, think about both your finances and your lifestyle. This guide will help you weigh the pros and cons of each option and decide what to consider before taking the plunge.

Buying a Car

Most people don’t pay for a car outright; they take out an auto loan. In 2022, Experian found that 81.12% of new cars and 34.59% of used cars were bought with loans. High vehicle costs mean consumers are borrowing more and choosing longer loan terms. For instance, new car loans averaged $41,445 in 2022, with an average monthly payment hitting a record $716. Loans for new cars often range from 61 to 84 months, and a small percentage even extend beyond that.

You can purchase a car from a dealership, through a private sale, or at an auction. If you need financing, you can check if you qualify for in-house dealer financing or look for third-party auto loans. Marketplaces like Auto Approve, AUTOPAY, myAutoloan, or RateGenius can help you find the best rates.

Finding the Best Car Purchase Deals:

1. Pick the Right Vehicle: Think about what kind of car fits your lifestyle. Families might prefer a minivan or SUV, while those seeking fuel efficiency might go for a small car or electric vehicle.

2. Budget Wisely: Ensure the monthly payments fit your budget. Use an auto loan calculator to help.

3. Use Autotrader: Compare new and used car options to find the best deal.

4. Check Kelley Blue Book: Know the fair market value of the car you’re eyeing to ensure you’re paying a reasonable price.

5. Research Insurance Costs: Get quotes from insurers like Progressive to see what coverage you’ll need.

6. Secure Financing: Don’t rely solely on dealership financing. Online quotes can give you more leverage to negotiate a better deal.

Leasing a Car

Leasing a car means you’re essentially renting it for a set period. You won’t build equity, but the vehicle is usually under warranty, so repairs are less of a concern. Leasing can be appealing for those who enjoy driving new cars without the hassle of selling them later. On average, lease terms last a little over 36 months, with an average monthly payment of $460.

Finding the Best Lease Deals:

1. Choose the Right Car: Decide what type of car suits your needs, whether it’s a luxury model or a reliable commuter vehicle.

2. Shop Online: Look for lease deals on dealership websites to compare options easily.

3. Prioritize Low Payments: Aim for the lowest monthly payment possible, considering the lease term fits your needs.

4. Understand Down Payments: Be aware of the upfront costs, especially for luxury leases that may require a hefty down payment.

Buying vs. Leasing: Pros and Cons

Buying a Car:

• Pros: Build equity, eventually pay off the car, no mileage limits, ability to customize.
• Cons: Higher monthly payments, responsible for repairs after warranty expires.

Best for: Those with good credit, planning to keep the car for several years, wanting control over the vehicle.

Leasing a Car:

• Pros: Lower monthly payments, always driving a new car, minimal repair costs.
• Cons: Never own the car, always have payments, mileage limits, no customization.

Best for: Those who like new cars frequently, want lower payments, and don’t care about owning a vehicle.

Key Questions to Ask

• How long do I want to keep my car?
• Do I prefer lower monthly payments or building equity?
• What’s my budget?
• How much do I drive, and can I stick to mileage limits?
• How’s my credit score, and what rates can I get?
• How will my choice affect my insurance rates?

Conclusion

There’s no one-size-fits-all answer to whether you should buy or lease a car. Each choice has its own set of benefits and drawbacks that depend on your unique situation. By evaluating your budget, driving habits, and financial health, you can make a more informed decision that suits your needs.