A car is likely one of the most expensive acquisitions you will ever make. Luckily, there are different ways to get you behind the wheel of a vehicle suited to all budgets. One of the major decisions to make is that of whether to lease vs. buy a car.
Many consider the pros and cons of leasing a car instead of buying one outright. Alongside the possible tax advantages, you can often drive vehicles that may be more expensive than you can afford to purchase. Auto leasing is big business, and it is estimated that up to 25% (or 72 million vehicles in the US are leased). This amount is expected to increase even more throughout the 2020s.
On the other hand, you have no restrictions on usage or mileage when buying a car. Plus, it’s cheaper in the long run. Both options have advantages and disadvantages, and our guide will help you understand the right choice for you– whether to lease or buy vehicles.
Leasing vs. Buying a Car: The Major Differences
|Up-front costs||Some leasing companies require an upfront deposit, down payments, or acquisition fees.||Costs can range from the cash price in full to a down payment.|
|Monthly payments||Lease payments are typically lower than loan payments as you’re paying off the vehicle’s depreciation period over a fixed term, not for the entire purchase price of the car.||Loan payments are higher than lease payments as you are paying for the entire cost of the car.|
|Maintenance||Lease companies will require you to maintain the vehicle’s upkeep to a high standard.||There are no requirements to keep the car to a specific standard, but poor maintenance will affect resale value.|
|Wear and tear||Wear and tear over or above expectations will incur charges stipulated in your lease agreement.||Wear and tear will damage the resale value of your vehicle, but unlike leasing, there are no financial penalties, even if the car purchase was loan financed.|
|Use/mileage||Most lease companies restrict the number of miles you can drive in a year. Restrictions vary, so check with your lease company. Exceeding the mileage limit will incur extra charges.|