Is it Better to Lease or Buy Your Next Vehicle?


Though the decision to lease or buy has financial implications - money isn't the only factor you should take into consideration before you pull the trigger on a deal. Your personal taste and lifestyle should also play a big role in whether you decide to buy or lease a vehicle. What's best for one person can be totally wrong for another when it comes to cars.


Leases and purchase loans are simply two different methods of automobile financing. Leasing finances the use of a vehicle; buying with a loan finances the purchase of a vehicle. With Leasing you pay for only a portion of the vehicle cost that you "use up" as you drive it; with Buying you pay for the entire vehicle cost. Here are the major pros and cons for each side of the lease vs. buy debate, so you'll know which option is right for you.


Benefits of Leasing a Vehicle

Here are 5 advantages of leasing:

  • Similar monthly payments. The cost to lease a car is typically much lower than to buy one. Little or no down payment is required and you don't have to pay any upfront sales tax. However, when you return a leased vehicle, you may have extra charges for racking up mileage that exceeds the allowable limit, terminating a lease early, or having any unrepaired damage.

  • Never being "upside-down". When you lease a car you rent it for a fixed term, which is typically one to 4 years. The amount you pay each month is tied to the amount of depreciation that's expected during the lease term. (Different makes and models of vehicles depreciate at different rates.) You only pay for the depreciation of the car that occurs during your lease term and you can never be "upside-down" which is a common situation where vehicle owners owe more than their car is worth.

  • Fewer repair expenses. A manufacturer warranty usually covers your lease term, so you never have to worry about getting hit with a large, unexpected repair bill. However, you are still responsible for regular upkeep, maintenance, and the minimum amount of auto insurance required by the state where you live.

  • Driving a new car more often. If you lease a new vehicle every few years, you will always have the benefit of driving a car with the most up-to-date technology, comfort, and safety features.

  • Never having to sell a vehicle. Once a "closed-end" lease term expires you can simply return the vehicle or choose to initiate a new lease for a different vehicle. But you never have to go through the hassle of selling a vehicle yourself or being concerned about getting a fair trade-in value. Or you may have the option to buy a vehicle at the end of the lease term for a pre-set price. That could be a good idea if the vehicle is worth more than the agreed upon purchase price - or a bad idea if it's worth less.

Benefits of Buying a Vehicle

Here are 5 advantages of buying:

  • Paying less over the long term. Monthly lease payments are generally less expensive than monthly car loan payments. However, with each loan payment you can build up equity for the future when you decide to sell it or trade it in. Buying a vehicle and driving it for several years after you pay it off can be the cheapest way to own a car. The longer you drive it, the less it costs.

  • Have the option to sell it. As a car owner, you have the flexibility to trade it or sell it (and pay off any existing loan balance) at any time. You're never locked into a fixed ownership period like with a car lease.

  • No mileage limit. When you need to drive a vehicle as many miles as you want, it's much better to own it. If you drive more than 16,000 miles a year you will want to buy. A lease sets a cap on the number of miles you can drive per year and charges a fee per mile driven over that limit.

  • No restrictions on appearance. If you want to use a car or truck without having to keep it in good condition or want to accessorize it, you should always buy it.

  • Ownership. Obviously the vehicle is not worth what you paid for it, 20% to 40% of its depreciation can occur within the first few years. But when you have paid off the loan, you do own your vehicle.

Should You Buy or Lease a Car?

Come talk to the financial experts at Brown Motors and they will help you determine if leasing or buying a car is right for you.