Buying vs. Leasing a Vehicle

When purchasing a vehicle, the question of buying vs leasing is common. It is a good question, because if you jump into either decision you may end up losing tons of money in the long run. The answer to the question “Which is better?” is “It depends.” Everyone has different needs, situations, and preferences.

Put simply, if you want to own a car for a long time you should buy it. If you are like most people and you cannot pay the entire cost of the vehicle, then you need to take out a loan to do this. You will pay the fixed rate loan off with interest over a period of months. If you want to get a new vehicle after some time, then you may want to lease it. Leasing gives you smaller monthly payments and interest and in the end you are only charged for the bit of the car’s life you used. As a car is used it’s value goes down, so if it is determined that your use of a car over a year only amounted to $5,000 dollars, then that is all you will pay in the end.

Leasing is, however, more complicated. There are acquisition fees, residuals, and more to take into account. There is also the fact that at the end of the lease you will need to get a new vehicle. This means that leasing saves you money in the short term, but costs you in the long term. If you have enough money to buy a new car every two or so years, then leasing may be for you. If you have less money or if you just enjoy having ownership of a car, then buying is for you. Buying saves you money in the long run, but causes higher monthly fees.

Leasing with the intension of buying is something you should be very careful with. This tactic involves paying smaller monthly fees and then buying the car for the remainder of its value at the end of the lease term. If used right this technique could save you money, but it is almost always more expensive then taking out a loan in the first place.

It just depends on what you want out of a car. If you will get a new car at the end of the lease and don’t mind dealing with the extra complications, leasing is for you. If you want to own a car and can afford the monthly payments, buying is for you. both techniques have potential to save you money depending on your situation.