Should I Buy or Lease my Next Car?
November 16, 2020
By Rahul Iyer
As we continue navigating our way through the pandemic, one question keeps coming up – should you lease or buy a car?
While this is always a hot debate during any time, it’s even hotter right now as we are all in strange financial times. Buying a car gives you ownership, while leasing is like renting.
Which is better for you – buy or lease? Most people benefit most from a lease, here’s why.
You’ll Have a Shorter Commitment
Everything is unpredictable right now, so why get yourself wrapped up in a financial commitment you may or may not be able to afford? Leases are short-term agreements. Get yourself a two or three-year lease and give yourself some breathing room.
If something goes haywire in the next couple of years, you know you’re off the hook on a long-term agreement.
You Don’t Need a Large Down Payment
Buying a car means coming up with a large upfront payment or at least a valuable trade-in. If you buy a new car, you’re investing in something that will lose money the minute you drive it off the lot. How’s a 20 percent loss sound to you?
You can get a lease for no money down (although it will be more expensive) or little money down. Since you’re not buying the car, you don’t have to invest as much (and you lose less).
The Payments are Lower
Lease payments are almost always lower than car payments. You aren’t paying off the price of the car. You only cover the expected depreciation during the lease term. You’ll also pay interest, taxes, and fees, but the total cost is often much lower than a traditional car payment, giving you more breathing room.
You Aren’t Affected by Depreciation
Depreciation is the largest downside of buying a car. Like we said before, the minute you drive it off the lot, you lose 20 percent. When you lease, you don’t worry about the depreciation. You only cover the expected deprecation when you sign the lease agreement.
If the car depreciates faster than expected, the lender faces the loss, not you. If the car is worth more than expected at the end of the lease, you have the option to buy it. You can then keep it or sell it yourself and make a profit.
Leasing Offers More Stability
Leasing offers you a bit more stability than buying. When you buy, it’s yours no matter what happens. If you lease, you give yourself breathing room. You aren’t stuck with an unaffordable car payment should the economy tank again and you don’t pay the excessive depreciation most cars endured.
If you prefer owning, it’s best to buy a used car rather than new. Used cars already experienced a majority of their depreciation, which means you pay a fair price rather than an inflated one. If you’re thinking about a new car, though, leasing is the most affordable way to go.