When you’re looking to get a new car, you’ve probably considered leasing a car rather than buying one. While leasing a car has many upsides, there are pros and cons to both buying and leasing that may make sense to you depending on your finances, lifestyle, and needs.
Without further ado, here’s our rundown for the pros and cons of buying a car vs. leasing a car.
Benefits of Leasing A Car
- Little Or No Down Payment – when leasing a car, you usually have zero down payment or you pay a pretty small amount as a deposit. You don’t need tons of up-front capital
- Low Monthly Payments – your monthly leasing payments are usually quite low, a lot lower than the financing payments you would be making if you were buying the car
- Low Maintenance Costs – a lot of the maintenance costs of a leased car will be paid for (or partially paid for) by the company that owns the car. Still, you should always check the fine print on your lease agreement!
- Depreciation Doesn’t Matter – though the car is losing value as you drive it, it’s not your car, so it doesn’t really matter to you
If you are interested and want to learn more, this guide to car financing dives deeper into all the aspects of car financing.
Cons of Leasing A Car
- Insurance Is Expensive – when you’re driving around a vehicle that isn’t technically yours, the insurance tends to be more expensive because the insurer has to consider that the vehicle is a money-maker for a leasing company
- Fees and Payments – when leasing new cars or changing leased cars, there are often multiple one-off fees and payments that the leasing company charges you
- Mileage Limits – leased cars often have mileage limits, and you’ll be charged if you exceed these limits
- Damage – if the vehicle sustains damage that was your fault, you HAVE to pay to get it fixed, even if it’s a small scratch that wouldn’t bother you personally
- Never Stop Paying – when leasing, you never “own” anything, so you’re ALWAYS making monthly lease payments forever.
Benefits of Buying A Car
- Insurance – when buying a car, your insurance payments will usually go down over time, assuming you don’t have any major accidents
- Selling – although cars lose their value, you can still sell your car when you want to move on and add the cash to your fund for buying a new vehicle
- Payments eventually stop – eventually, you’ll pay off your car and you will own it. You won’t be making monthly payments any more
- Damage is YOUR problem – if you scratch or dent your car, you don’t need to be too worried because it’s your property, not a leasing company’s
- No mileage limits – lots of leased cars have limits for mileage, but this isn’t the case if you own your car. You can do whatever you want with it!
Cons of Buying A Car
- Maintenance – as your car gets older, it’s naturally going to need more maintenance and repairs. Although you’ll stop making payments when you own the car, there may be additional maintenance costs to pay for
- Value Drops – as you probably know, cars depreciate in value massively. When it comes time to sell, the car will be worth much less money than when you bought it
- Down Payments – you’ll usually need to make a down payment when buying a new car – this could be thousands depending on what car you want
- History – if buying a car second-hand, you need to worry about the car’s previous owners and any underlying damage you might not know about
The Bottom Line
All in all, there are pros and cons to both leasing and buying a car. Ultimately, it all comes down to you and your personal preferences in terms of comfort, finances, and how often you want to drive.