Shopping for a vehicle should be fun and exciting, but financial questions often loom large over the process. Since there is no one-size-fits-all answer to whether you should buy or lease a vehicle, educate yourself on the pros and cons of each option to ensure you’re shopping with confidence. Here are some of the things that can help you make the right decision when looking for a new ride.
Buy vs. lease: What’s the difference?
Both options will get you in a new car, but there are significant differences when you reach the end of the terms. When buying, the vehicle is yours once it’s fully paid off, and you can enjoy years on the road without a monthly payment. If you finance the purchase, expect to make monthly payments for 60 months or more to purchase an automobile outright. Some drivers will sign agreements for up to eight years to get monthly payments lower.
Leases typically last 36 months, and when the term ends, you’ll return the vehicle to the dealer. Most leasing arrangements offer you the option to buy at the end of the period. While the prior months’ payments will help lower the costs, you’ll still be paying quite a bit more in total than a buying agreement.
Why buy a vehicle?
There are many benefits to buying a new ride outright, but it all depends on your specific financial situation. Although monthly payments are usually higher than that of a lease, taking ownership of the automobile can be worth the cost.
With proper maintenance, many drivers can go 10 to 20 years in the same vehicle after it’s been paid off. These years of no monthly payment can add up quickly versus leasing a vehicle over that same amount of time. Taking ownership is the main reason people choose to buy — and keeping your auto in good condition will help increase its longevity.
The other significant difference is freedom. Most leases come with mileage limits, and the penalties for going over can quickly become expensive. When buying outright, you can travel across the country and rack up miles without fear of financial retribution. This freedom comes when you’re ready to buy again, as all money made from selling your car stays in your pocket.
So, why lease a vehicle?
Despite the benefits listed above for buying, there are several reasons why leasing might make the most financial sense for your situation. The most apparent reason to lease is money savings. Monthly payments are lower because instead of paying for the vehicle itself, you’re only paying for depreciation — this is why leases come with mileage caps, guaranteeing your car will be returned with some resale value.
Leasing is also the best way to stay on top of the latest safety features and technology automakers offer. With most terms ending after three years, you don’t have to worry about your ride becoming outdated. And if you fall in love after those early years, you’ll still have the option to buy it at the end.
Peace of mind is another critical reason drivers choose to lease. You’ll almost always be leasing a newer model, and maintenance costs are often covered under warranty. This means you may never pay for oil changes or preventive care again. Brand new cars and trucks are more reliable, and with virtually no maintenance costs, you’ll be saving money on almost every tank.
With every driver’s unique financial circumstances, only you can decide which way is best to get that new ride. If you can afford a higher monthly payment and take great care of your vehicles, buying outright will save you money long-term. If you like the sound of free oil changes and maintenance with a lower monthly obligation, leasing a vehicle will keep you behind the wheel of the latest models every three years or so. Keep these tips in mind and shop for the car of your dreams confidently.
Finances FYI is presented by 1st Security Bank.
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