Last updated on November 11, 2019 at 03:04 pm
Whether to lease or buy a new car is an age-old quandary. Getting a new set of wheels can be equal parts exciting and nerve-wracking. Most people spend hours researching before even setting foot on a dealership lot. And even armed with all that information, it can still feel overwhelming once you get there.
One decision you’ll want to nail down to reduce stress on your trip to the dealership is whether to lease or buy a new car. Both options have advantages and disadvantages, and what makes sense for me (I ended up buying in all cases) may not make sense for you. Here are some key considerations to help you make an informed decision.
Know the Cost Difference
Leases typically offer lower monthly payments, but you can’t ignore the down payment, maintenance and repairs, car insurance, taxes, and other fees. Unfortunately, there are so many variables that we can’t definitively state which option costs less. https://www.edmunds.com/ published a study comparing several scenarios and found that leasing is the more expensive option over a five-year period, while Kiplinger recently published an example showing that leasing can be more economical than buying.
The best advice we can offer is to calculate each scenario based on the deals that are available to you. Factor in all numbers, including any that may be hidden in fine print. The excitement of getting your new car off the lot can sometimes cloud your ability to crunch numbers at the dealership, so don’t be afraid to take your time or walk away if needed.
Edmunds.com offers several calculators that can help you in determining costs.
Know Your Personality
Sometimes it doesn’t boil down to just dollars and cents. If you’re the type of person who enjoys that new car smell every few years, a lease may be a good option for you. If you’re the type of person who thinks it’s important to build equity and you plan on sticking with your vehicle for the long haul, you may want to buy.
Know Your Driving Habits
Leases include annual mileage allotments, typically between 10,000 and 15,000 miles. If you exceed this allotment, you can pay a 20- to 25-cent penalty per mile. On the other hand, racking up a high number of miles on a car you own can cost you when you want to trade it in.
Another consideration is wear-and-tear. If you’re hard on your car or have kids that may get bored in the backseat, you’ll want to be aware of fees that can hurt you when a lease is up. Again, buying does not exclude you from wear-and-tear costs.
As you can see, there’s no right or wrong answer to the question of buying or leasing. Hopefully these tips will help your thought process when deciding which option works for you based on your unique needs.
Have any tips or pitfalls you’ve encountered buying or leasing a new car? Feel free to share in the comments!
Click here for more information about insurance in your state.