Should you lease or buy your next car?
Last updated: March 2022
There are a few things to think about if you're debating whether to lease or buy your next car. Buying a car typically more expensive month-to-month, but you'll own it, according to Consumer Reports. Leasing a car has lower monthly costs, but it'll only be in your possession for a certain number of years before you have to return it.
Why are the costs higher to buy a car vs. leasing it?
Typically, the monthly payments for financing (buying) a car will be higher because you're paying for the full cost of the car plus interest on the loan, says Consumer Reports. Lease payments tend to be lower since you're not paying for the full price of the vehicle, according to Edmunds.
Upfront costs of buying a car
Consumer Reports notes that the initial costs of buying a vehicle include:
- Down payment (or the cash price if you're paying in full)
- Registration costs
- Other applicable fees
Upfront costs of leasing a car
If you're leasing a vehicle, according to Consumer Reports, you'll typically have to pay:
- A down payment
- A security deposit
- The first month's lease payment
- Registration costs
- Any other applicable fees
To get an initial idea of whether leasing or buying a vehicle would be more expensive, you'll need to add up all these costs and compare them.
Are there additional expenses to consider?
From maintenance costs to monthly payments, here are some other potential expenses to consider when deciding whether to lease or buy a vehicle.
Maintenance expenses are an inevitable part of owning or leasing a vehicle. With most leases, which are typically three years, the car will be under warranty for the duration of the lease, says Edmunds. Standard auto warranties are three years or 36,000 miles, but some are longer, according to Autoblog.com. So, you'll likely only be paying for routine maintenance, like oil changes, with a leased vehicle. As a purchased vehicle goes beyond its warranty, you'll typically have to pay out of pocket for any necessary repairs and routine maintenance.
Mileage and Wear and Tear
When you lease a vehicle, the contract usually includes a maximum number of miles you can drive each year. If you exceed that mileage over the duration of your lease, Edmunds states that you'll typically be charged 15 to 25 cents for each mile you've gone over the allowed mileage. Additionally, if there is excess wear and tear on the vehicle, you may incur fees at the end of your lease.
Ongoing Vehicle Payments
While leasing a new car every few years can be appealing, you may end up making monthly payments indefinitely. Consumer Reports notes that if you continue to lease cars, you'll always be paying for a vehicle. If you buy a vehicle, however, those monthly payments stop once the car has been paid for, says Edmunds. If you keep the car after it's paid off, you can then save that money or put it toward other expenses.
There are pros and cons to both leasing and buying a new car. By considering how either choice may affect your budget and other wants and needs, you'll be better prepared to make the decision that's right for you.