You’re ready for a new car. The big question: Should you lease or buy?
Leasing is not a new option, and the question of whether it is the best option has been asked since leases were first introduced. Nevertheless, with the average cost of new car purchases exceeding $33,000, new car leases have surged more than 25%.
Not for everyone, but for a significant number of people, the monthly payment is the deciding factor in a car purchase. That $33,000 car will have a monthly payment of more than $600 if financed over four years by someone with an average credit score.
But leasing offers more manageable payments for many people. In fact, the average lease cost is $84 per month cheaper than a car loan payment for the same auto.
There’s something about the latest and greatest that moves us all. And in the car world, technological advances over recent years have been pretty astounding. Anyone can be forgiven for wanting to experience the best the automotive world has to offer, and today’s best can be leaps and bounds beyond the best from just a few years ago.
For people who lust for shiny and new, a lease can be a great deal. Rather than locking in to six or more years of loan payments for the same car, leases typically end in just three years. If you are that person who gets itchy when a new model comes along, a lease could be just the ticket.
Of course leases have a downside. The biggest one – and the one that seems to hit home for most people – is that you never actually own the car. With a lease, you’re essentially just making payments on the depreciation of the vehicle.
That means that you won’t get to take advantage of owning a car free and clear, with no monthly payments. And with the reliability and longevity of cars these days, you could end up driving the same car for a long time without making payments, saving yourself thousands of dollars.
Instead, when the lease is up, you have no car, so you’ll have to either lease another, buy the one you have already leased, or buy a new one altogether (albeit without a trade-in to offset the cost). This is a dealbreaker for a lot of folks.
Plus, there are other potential costs of a lease. For example, most leases limit you to 12,000 miles per year, with charges for any miles over. If you have a long commute or travel a lot, this could get expensive. There can also be additional charges for “excessive wear and tear,” so you could end up paying for dents, dings, or spills in the interior.
In the end, the decision is a personal one. If you can afford to pay a little more or be content with a little less car, the equity you get from buying is usually the more sound financial option.