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Should I buy or lease my next car?

We are asked all the time should I buy or lease? It really depends on your situation. Leasing from a financial standpoint is better than it used to be. The reasons are interest rates are at historical lows and residual values of used cars are nearly as high as they have ever been. When you lease you are paying the difference between your negotiated price for the car and the residual value at the end of the lease plus applicable interest. With interest rates low and residual values high the “amount” you are leasing is smaller which translates into lower payments. Here are some pros and cons to both;

Benefits and pitfalls of buying the car

You own it — Assuming that you finance the car, it can take 2-3 years to build up any equity but eventually you’ll have an asset that can be sold or traded in if needed.

No payments once your loan is repaid — When you buy a car, you’ll eventually pay off the loan and own the car free and clear, at which point you’ll no longer have a monthly car payment. When you lease, you’ll always have a car payment.

No mileage restrictions — If you own your car, you can drive it as much as you’d like without having to worry about paying a penalty. On the other hand, if you lease, you’re generally limited to 10,000, 12,000, or 15,000 miles per year before you’ll start accumulating penalties.

No charges for excessive wear — When you lease, you’ll generally be held responsible for anything that could be considered beyond “normal wear and tear.” If you get a dent in a car you own, for example, you can choose to fix it or simply live with the dent and save the money.

The unforeseen big repair—With a lease you are typically under warranty. You know what your payment is every month. When you own the car past the warranty period an expensive repair or two can happen.

 

Benefits and downside of leasing a car

Little or no maintenance worries — For the most part, leased cars are under factory warranties throughout the term of the lease agreement.
You aren’t buying tires and replacing brakes in most cases with a lease due to the low miles.

Cheaper monthly payments — While it depends on the particular make and model, as well as factors such as your down payment, you can generally lease a car for less money per month than it would cost you to buy. When you lease you’re only paying for the vehicle’s expected depreciation and associated charges, not for the residual value of the vehicle.

New car every few years—There is nothing like a new car! Many business people want a newer car to make a good impression. If you get bored with your car you get a new one every few years.
In the long run leasing is generally more expensive than buying a car.
Leasing is convenient and you don’t have to worry about selling your car when you are looking for something new. If you can use the leased car for business and take a tax deduction the monthly costs become even lower.
For brevity we have only listed a handful of pros and cons for both choices. Please call us at (858)205-3920 and we can answer any specific questions you have. If you are looking to buy or lease please take advantage of our broker service. We will get the best deal for you with our fleet pricing and have the car delivered to your house.

3 thoughts on “Should I buy or lease my next car?”

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