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Leasing a Car vs Buying: What Are the Differences?

If you’re in the market for a new car, be prepared for an unavoidable dilemma. We’re talking about the ongoing debate between leasing a car vs buying a car.

There are pros and cons to each option. One option allows freedom from commitment. The other option allows freedom to do what you want.

The first question you need to answer is whether or not you want to own the vehicle. However, the differences between leasing a car and buying a car go much more in-depth.

We’re here to walk you through both sides of the debate. Keep reading for a complete leasing and car buying guide to help you choose a path moving forward.

Leasing a Car

First, let’s take a look at leasing a car vs buying a car. When you lease a car, it’s like renting an apartment.

Most obviously, this means you’re paying for the benefit of using a vehicle temporarily. You will never own a lease vehicle unless you decide to go for the lease-to-own option.

While this might sound like a bad deal for some people there are several perks to leasing a car.

Lower Monthly Payments

Right now, 64% of Americans are living paycheck to paycheck as a result of inflation and the after-effects of COVID. This can make it incredibly difficult to get approved for (or afford) a car loan.

When leasing a car versus buying a car, you can expect lower payments on brand-new vehicles. You can probably pay hundreds of dollars less on lease payments than you’d pay in car loan payments for the same vehicle.

For most consumers, this grants them access to high-end vehicles or luxury models they might not be able to afford through a traditional car loan. This also means having the option of driving a brand new vehicle, rather than settling for used cars.

No Commitment

Another perk of leasing a car vs buying one is that there is a limited commitment to your payments. Most car leases are only two or three years. Therefore, you’re not bound to the car past the point of your initial lease.

Car buying, on the other hand, places the ownership of the vehicle on you until you sell it or trade it in. That means you alone will be paying for the car’s depreciation.

A brand new vehicle can lose as much as 30% of its value in the first year. For the next several years, it will lose 15% to 18% of the remaining value.

Reliability, Safety, Comfort, Convenience, and Luxury

Leasing a car vs buying a car means you’re always driving a brand new (or close to brand new) vehicle. These models have the latest safety features and technology. This equates to maximum comfort, luxury, and convenience.

Furthermore, when leasing a car, you’ll be driving the vehicle during its most reliable years. Not only can you expect fewer issues, but if they arise, they should be covered under the manufacturer’s warranty.

Finally, many car leasing contracts include built-in maintenance plans. These typically include free services like oil changes, tire rotations, and more. Of course, you’ll be responsible for replacing tires and other expendable items when necessary.

Buying a Car

Now let’s take a look at the other side of the debate of leasing a car vs buying a car. Taking out a loan to buy a car is the more common option motorists choose, and for good reason. This option has its perks.

No Restrictions

Like homeownership, car buying grants you the freedom to do whatever you want with the vehicle. You’re not limited on how many miles you can put on it. This makes buying a car the ideal choice for people who do a lot of traveling.

You also won’t be held responsible for what car lease agreements call “excessive wear and tear.” If you lease a car, the company can charge you penalty fees for extra mileage and excessive wear and tear.

They typically charge between 10 cents and 50 cents for every additional mile you put on the car after the maximum allowance. If after three years you’ve gone over by 2,000 miles, you could be looking at a $1,000 fee.

Additionally, when you own a vehicle, you have the right to use it as collateral for a title loan. For example, if you need money in a pinch, you can look at Title Loanser to determine how much you can get based on your vehicle.

Value Over Time

It’s true that leasing a car vs buying a car saves you on monthly payments. However, it’s important to look at your costs over time to get an accurate and fair picture of the financial differences.

If you lease a vehicle, you’ll eventually have to lease another one, extend your lease, or opt for the lease-to-own program. In any event, you will always be making payments.

Conversely, if you buy a car, you will eventually pay it off. Once you do, it will last you for years, even decades (provided you maintain the vehicle well).

If you compare making $500 lease payments for 20 years vs paying off a $50,000 car, the difference is staggering. After 20 years of leasing vehicles, you will have paid $120,000.

You Can Always Sell a Car You Own

Earlier, we mentioned that leasing a car vs buying a car provides you with a little more flexibility. After all, once the lease is up, you’re no longer bound to that vehicle.

But what happens if you have a financial emergency within those three years? What if you can no longer afford your lease payments?

If you own the car, even if you haven’t paid it off, you can always sell it or trade it in for a more affordable option. However, if you try to terminate a car lease early, you could be met with thousands of dollars in penalty fees.

Do You Understand the Difference Between Leasing a Car Vs Buying a Car?

We hope you enjoyed our car buying and car leasing guide. As you can see, there is a lot to consider on both sides of the argument. Follow the notes listed above on the differences between leasing a car vs buying a car to make your choice.

And if you’re looking for more personal advice or financial guidance, look no further. Browse through some of our other articles to find the information you need to live your best life.

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