10 Steps to Finding the Right New Car
Step 3: Lease or Buy Your Next New Car?
Leases offer a lower monthly payment, but buying a car gives you equity that you can use as a trade-in on the next new car when the time comes. In addition, when you lease you are never done with the payments. When you buy, you eventually will not have to pay anymore on the car, and you can then choose to drive the car or trade it in. Depending on your specific needs, a lease may be out of question. Buyers who like to customize their car or drive many miles may not want to lease. A buyer who uses their car for errands and commuting may find a lease fits their lifestyle perfectly.
Here are the major advantages of leasing a new car:
- Get a better car for less money.Leases offer very low payments when compared to buying the same car. This means you can afford to driver a better car for the same money. The payment on a fairly luxurious car could be upwards of $700 per month, but with a lease that same car may be $500 or less per month.
- Get a new car every 12- to 48-months. One benefit to leasing is that you can get a brand new car on a new lease at the end of your current lease term. The typical lease term runs from 12-months to 48-months. We recommend you stick with 36-months or less, due to warranty coverage and other concerns.
- No "old car" hassles. Your lease will likely be under warranty for your full lease term and you will never have to worry about a broken down old car to spend money on. You will also be able to dispose of the car easily when the lease term expires. There is no hassle with trying to sell it or trade it in.
Here are the major advantages of buying a new car:
- You own the car. When you own the car, it is yours to do with as you please. You can sell it, customize it, or trade it in on the next new car. Depending on the type of car you purchase, owning can also convey certain tax advantages.
- Unlimited mileage. Most leases have mileage limitations – as few as 10,000 miles per year -- and if you exceed the limits you can be heavily penalized when you turn in the leased car to the dealer. When you own the car, you can put a million miles on the odometer without paying a penny extra on the payments.
- You build equity. When you are done with your payments, your car will be worth something -- either as a trade-in or on the private market. You can recover some of your investment by selling your car. With a lease, you have no equity built up in the car. You are able to dispose of the car as you see fit -- including giving it to charity, to a relative, or simply sending it to the recycling center.
More Car Leasing Information
Autotropolis has an excellent buy vs. lease calculator that will allow you to directly compare purchasing vs. leasing. We also maintain more information on leasing vs. buying on our Lease vs. Buy page.
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