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Is leasing or owning a better option for you? Let’s compare!
posted in: Financial Wellness
by Christy McFarland

Leasing vs owning a car

If you need a new car, but you’re dreading the dealership, it’s probably safe to say most people understand how you’re feeling. If you’ve always bought, have you ever thought about leasing? Maybe leasing is more your thing, but would owning be a better option? We break it down. 

Buying

Pros

  • You could own your car in full someday, meaning no more car payments. 
  • It’s up to you if, or when, you want to sell it.
  • Insurance limits are typically lower on an owned car vs a lease.  

Cons

  • Monthly payments are typically higher than if you were to lease.
  • You’re usually required to have a down payment. 
  • You could end up in a situation where you owe more on the car than it’s worth. 

Leasing

Pros 

  • Out-of-pocket costs are lower when you first get the car. There is typically little (or no) down payment required. 
  • Monthly payments are usually lower than if you were to buy the car.
  • You get the variety of having a new car every few years.   
  • You’re “renting” the car for a fixed period of time, meaning you’re only paying for the use of the car. This removes the stress of your car depreciating.
  • If you can’t get a loan to buy a car, leasing is a good alternative.  

Cons

  • You’ll have some type of mileage restriction. Most restrict your mileage between 12,000 and 15,000 miles per year. If you go over, you could owe anywhere between 15 and 25 cents for each mile you go over (depending on your contract).
  • You will always have a car payment.  
  • Insurance is usually higher for leases.
  • Your monthly payment is calculated by taking the difference between the purchase price and the estimate it’ll be worth at the end of its life. That being said, you’re paying for the most expensive period of the car’s life.  
  • Sometimes lease contracts have clauses regarding "excess wear and tear."

Quick tip: If you’re going to lease, be sure to think about which type of lease you’re interested in before getting to the dealership. There are two types: Closed-end and open-end leases. Closed-end leases give you the option to walk away from the car after your contract ends. Open-end leases require you to buy the car at the end of the contract for an amount you already agreed on. 

Basically, it comes down to this…

If you want to own your car someday and enjoy the benefits of not having a car payment, buying is probably for you. But if you like the idea of having a different car every few years and lower monthly payments, but are okay with always having a monthly car payment, leasing is probably more your thing. It depends on what you want and your unique situation.

Hopefully this helped you figure out what’s better for you! We’d love to hear which car-type you are in the comments below: Do you own or lease? 

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