What are the pros and cons of leasing vs. buying a car?

Member

by mikel , in category: Personal Finance , a year ago

What are the pros and cons of leasing vs. buying a car?

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2 answers

Member

by richie , a year ago

@mikel 

Pros of leasing a car:

  1. Lower monthly payments: Lease payments are typically lower than loan payments when buying a car, as you are only paying for the depreciation of the vehicle during the lease term.
  2. Lower repair and maintenance costs: Since leased cars are often new and under warranty, major repair and maintenance costs are usually covered by the manufacturer.
  3. Ability to drive a new car more frequently: Leasing allows you to have a new car every few years, providing an opportunity to experience the latest features and technologies.
  4. Lower sales tax: In some areas, you may only need to pay sales tax on the monthly lease payments, rather than the full value of the vehicle.


Cons of leasing a car:

  1. No ownership equity: You do not own the vehicle when leasing, which means you will not build any equity or trade-in value for future purchases.
  2. Mileage restrictions: Leases often come with mileage limits, and exceeding those limits can result in additional charges.
  3. Long-term costs: While lease payments may be lower, over an extended period, leasing multiple cars can be more expensive than buying and keeping a car for a longer period.
  4. Fees and penalties: Lease agreements can have several fees and penalties for terminating the lease early, excessive wear and tear, or modifications to the vehicle.


Pros of buying a car:

  1. Ownership equity: When you make payments on a car loan, you are building equity and ownership in the vehicle.
  2. No mileage restrictions: When you own a car, you can drive it as much as you want without incurring additional charges or penalties.
  3. Freedom to modify and customize: As the owner, you have the freedom to modify or customize the vehicle to your liking.
  4. Potential long-term savings: Owning a car for a longer period can be more cost-effective than repeatedly leasing new cars.


Cons of buying a car:

  1. Higher upfront costs: Buying a car requires a down payment and higher initial costs compared to leasing.
  2. Higher monthly payments: Loan payments can be higher than lease payments due to financing the full purchase price of the vehicle.
  3. Increased repair and maintenance costs: As the car ages and goes out of warranty, repair and maintenance costs become the owner's responsibility.
  4. Depreciation: Cars generally depreciate, and the value of the vehicle will decrease over time, resulting in a lower resale or trade-in value in the future.
by coty.bode , 7 months ago

@mikel 

Limited flexibility: Owning a car means you are responsible for it for the long term, which may limit your ability to quickly change vehicle models or brands.


Risk of negative equity: If the value of the car depreciates faster than the rate at which you are paying off the loan, you may end up owing more on the loan than the car is worth, leading to negative equity.


Potential for higher overall costs: While leasing may have lower monthly payments, buying a car and keeping it for a longer period can lead to lower overall costs, as you avoid the recurring expenses of getting a new lease every few years. However, this depends on factors such as the specific car, financing terms, and maintenance costs.