I want to talk about something we all think about when we’re in the market for a new car: Should you lease or buy it? This decision can impact your wallet for years, so let’s break it down into simple terms, with real-life examples, so you can figure out what’s best for you.
1. Monthly Payments: What Can You Afford? Leasing a car can seem like a great deal because the monthly payments are usually lower than buying. According to a report, the average lease payment is about $578 a month, while buying a new car costs around $716 a month. Why is leasing cheaper? Well, when you lease, you’re only paying for how much the car loses value during the lease. You’re not paying to own the car.
However, if you keep leasing cars over the years, you’ll always have a monthly payment. It’s like renting an apartment—you don’t build ownership. On the other hand, if you buy a car, you might pay more each month, but after a few years, the loan gets paid off, and the car is completely yours. Imagine paying off your car and not having to worry about monthly payments—that’s a big deal!
2. How Long Do You Want to Pay? When you lease, those payments never stop. You’ll finish one lease, return the car, and then start a new lease with new payments. But if you buy a car, you’ll eventually stop making payments. This means more freedom in your budget. Maybe you’re planning to save up for a house or you want some extra money for other important things. Owning the car gives you that flexibility.
3. Upfront Costs: How Much Can You Pay Right Now? Leasing is also a good option if you don’t have a lot of money to put down. If you have good credit, you can often start a lease with little to no down payment. But if you’re buying a car, most experts recommend putting down about 20% of the car’s price for a new car or 10% for a used one. For example, if you’re buying a $40,000 car, you might need to put down $8,000. That’s a lot of money upfront!
With leasing, you won’t need that big down payment, but remember—you won’t own the car at the end of the lease. You either have to return it or pay the buyout price to keep it.
4. How Much Do You Drive? Another big question: How far do you drive every year? Most leases come with a limit—usually around 12,000 miles per year. If you drive more than that, you’ll have to pay extra for each additional mile. Let’s say you drive 15,000 miles a year—that’s 3,000 extra miles, and at 25 cents per mile, that’s an extra $750 at the end of the lease! If you drive a lot for work or long trips, buying might save you money in the long run.
5. Do You Like Driving the Latest Models? Some people love the idea of driving a brand-new car every few years. If that’s you, leasing is great because it lets you switch to the latest models without a huge commitment. You’ll always have the latest features, like better technology and safety options, without the long-term financial obligation of buying a new car every time.
However, there’s a downside: If you end your lease early, you might have to pay high termination fees. So if you’re not 100% sure you’ll keep the car for the full lease term, buying might give you more flexibility.
6. Can You Keep the Car Clean? Leasing also comes with expectations for how well you take care of the car. Lease agreements allow for normal wear and tear, but if you return the car with big dents, permanent stains, or missing parts, you could be charged extra. If you tend to spill things in your car or don’t take it in for regular maintenance, buying might save you money in the long run since you don’t have to return it in perfect condition.
7. Do You Use Your Car for Business? Here’s a cool tip: If you use your car for business, leasing can offer some tax benefits. You might be able to deduct part of your lease payments or claim a tax deduction for the miles you drive for business. Of course, it’s always smart to check with a tax professional, but this could make leasing even more attractive if you’re a small business owner or freelancer.
Final Thoughts: So, should you lease or buy? If you like driving new cars, don’t drive a lot, and want lower monthly payments, leasing could be a good fit. But if you want to own your car and have more financial freedom in the long run, buying is likely the better choice. Take some time to think about what works best for you, and you’ll make the right decision for your lifestyle and budget!
