When it’s time to get a new car, one of the first decisions you’ll have to make is whether to buy it or lease it. If you aren’t paying cash and have to take out a loan, you’ll have a monthly payment either way. So which option is better?
While many financial experts recommend never leasing a car, there are a few times it does make sense. Here are some reasons you may want to lease a car:
- Lower monthly payments. Generally speaking, the monthly payment on a car lease is much lower than that of a car payment because it is based on a car’s depreciation instead of its purchase price. In addition, you may only have to put a little down, if anything at all.
- Fewer repair costs. Most likely, major repairs will be covered by your warranty. You’ll be responsible for general upkeep, but you won’t have to worry about a huge repair bill destroying your monthly budget.
- Less hassle when it’s time for a change. When you’re ready for a new car, you don’t have to worry about selling your old one. You can simply return the car when your lease expires and pick out a new one.
So why do people buy a car if it costs more and can be more of a hassle? Here are a few reasons:
- True ownership. Your car is yours. You can customize it as much as you like, and no one is going to expect you to keep it in pristine condition—or charge you if it isn’t.
- No mileage limits. When you lease a car, you must stay within your mileage limits or pay a pretty penny for exceeding them. When you buy a car, you can drive it as much and as far as you’d like.
- No monthly payment (eventually). If you have to take out a car loan, at some point you’ll pay it off and your monthly payment will drop to $0. When you lease, you will always have a monthly payment.
Looking at the big picture, leasing a car is actually more expensive in the long run. Not only will you always have a monthly payment, but also you won’t be building up any equity in your car that you can cash in later when you sell it.
But it’s not always about the money. If it’s important to you that you have a new car every few years with the latest technology and safety features, or if you use your car for business purposes and can write off related costs, leasing might be your best bet. Just make sure you run the numbers and take all factors into consideration.
Whether you decide to lease or buy, be sure to store the related documents on InsureYouKnow.org. This includes any loan documentation and/or a copy of your car’s title. It’s vital that you keep all your important financial documents in one place so you and your loved ones don’t have to dig through a mountain of paper whenever they need to be accessed.