What To Consider Before Leasing vs. Buying A Car

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Considering getting a car? Look at you go, zoomin’ into success. But before you get behind the wheel of any car, you should know whether buying or leasing makes the most sense for you. Leasing a car, which is similar to a long-term rental, offers you a low-commitment situation, while buying a car means you’re stuck with your vehicle for the long haul — you own it. Not sure which is right for you? Here are a few questions to ask yourself.

1. How long do you want the car?

The first thing you should be asking yourself is how long you want to deal with this particular car. If you’re living somewhere temporarily and don’t want to haul a car back when you’re ready to move on (or you just don’t like commitment — hah), leasing is for you. You’ll be able to sign a specific contract that lasts a certain number of years. After those years are up, you’ll return your car and be on your merry way. But if you’re looking to keep something long-term, consider buying.

2. What do your savings look like?

You’ll need to really analyze your savings before jumping into a car venture, specifically because how much you’re paying upfront will change depending on whether you’re buying or leasing. Many lease agreements will lower the down payments or even waive the initial fee. However, if you’re opting for buying a car, you might need to put down a certain amount upfront, which could affect your choice.

3. How much money can you shell out per month?

If you’re leasing a car, your monthly payments will likely decrease over time because of the depreciation of the car. Or your payments will stay the same if you’re paying off a car loan since you’re paying a lump sum to own the item. If your priority is to have more cash every month, you’ll likely save more money by leasing.

4. How much do you drive and how rough are you on cars?

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If you travel a lot, like over 10,000 miles a year, you may need to consider owning versus leasing. Most leases have a limit to how many miles you can put on the car, and if you go over that limit, you could be paying anywhere from 10 to 20 cents a mile. Basically, you could be totally screwed if you take a big trip after you hit that mileage limit. You also could face some serious wear and tear fees depending on your lease length and agreement.

Owning a car, on the other hand, doesn’t include any limits to how many miles you can put on it, but you should be aware that your car will likely depreciate with increased mileage. The wear and tear fees vary greatly depending on your car insurance.

5. What’s cheaper in the long run?

It’s all about equity, baby, so it’s no surprise that owning a car is (most of the time) cheaper in the long run. Think of it in terms of renting a home versus buying — you’re paying monthly installments whether you’re leasing or buying, so you’ll see more of a return on your investment if you pay a car off and sell it or trade it in. However, every situation is different, so if you’re not sure what makes the most sense for you in the long run, you can check out Bankrate’s calculator for buying versus leasing.

So, to recap…

Leasing

• You don’t own the vehicle; you use it and then return it for another vehicle
• Decreasing monthly payments with the depreciation of the car
• No equity on the car (you gained nothing from your payments in the long run)
• Possibly paying less up front
• Could be limited to how many miles you can put on the car
• Probably have to front any wear and tear of the car

Buying

• You own the vehicle; you can sell it, trade it in, etc. whenever you please
• Consistent monthly payments of the same amount
• You gain equity on the car because once you’re done with payments, you own it
• Possibly paying more up front
• Unlimited miles, but car could depreciate with the increase in miles
• Car insurance could cover a lot of wear and tear