Buying Vs. Leasing a Car: Which is Right for You?
2 min. read
By: FCU Team
Cars are decision vacuums. Between figuring out the type of car you want, its color, the brand, accessories and more, you have to make dozens of decisions before you even arrive at the biggest one: to lease or to buy? Everyone’s needs are different, but we’re here to make the process a bit easier by highlighting the pros and cons for each option.
Buying a Car
When you buy a car, you’re typically taking out a loan, making a down payment and committing to make payments until the loan term is over, with the car becoming yours after the loan is paid off.
Buying a car means it’s yours! You’re able to make whatever changes you want in terms of customization as well as drive it as much as you like. You also have the freedom to sell your vehicle at any time or to keep it indefinitely. This flexibility and sense of ownership is a huge plus to car owners.
Buying a car will likely have a higher upfront cost than leasing due to having to pony up for a down payment. On top of that, your monthly payments will likely also be higher than they would be while leasing. You’re also on-the-hook for long-term repairs and maintenance.
This is assuming you’re buying a brand new car. Used vehicles may offer a better deal in terms of monthly payments. On the other hand, a used vehicle could result in more required maintenance, which could absorb the money saved from the better deal if servicing costs are high. On the flipside, purchasing a warranty may mitigate some of this cost.
Leasing a Car
Leasing is similar to renting a car, except the rental period is much longer. Like buying a car, you also make month payments, but these payments are going toward the car’s depreciation. Leased cars also come with certain restrictions, such as a limit on the amount of miles you can drive and the inability to customize the vehicle.
In the short-term, leasing a car is more affordable as the monthly payments are far lower compared to buying a car. You’re also able to return the car at the end of the term and lease another vehicle if you have new needs or are just craving a change. Some lease agreements also give the ability to purchase the vehicle at the end of the term.
The restrictive nature of leasing is one of its biggest drawbacks. Leased cars have a mileage limit, meaning you can’t drive more miles than your agreement allows. This isn’t an issue if you don’t use a vehicle very much. For others, it could be the difference between taking a road trip and staying home. Going over your limit could incur financial penalties as written in your leasing agreement.
Insurance costs for leasing are also typically higher than those for owning the vehicle. If you choose to purchase the car at the end of the loan term, you will also have wind up paying more for the car in the end.
Which Option is Best for You?
While buying a car is considered to be more financially advantageous, the best option depends entirely on your needs. Leasing may be more expensive over a long period of time, but it comes without the financial burden of a down payment. This could make leasing a good option if you need a car for a limited period of time.
If you’ve decided you’d like to take the plunge and purchase a new or used vehicle, Florida Credit Union is ready to be your financial partner! Find out more about our vehicle loans and apply online on our website.