Leasing vs. Buying a Used Car: Which Is the Best Option?

Whether you buy or lease a car, both options will allow you to drive, but under different financial implications.  If you want the most cost-effective choice in the long run, then you may want to purchase a used car and keep it for some years. On the other hand, if you desire to enjoy the newest technology and up-to-date safety features, you can consider leasing a car. Therefore, there is no one-size-fits-all answer on whether to lease or buy. However, you may want to weigh between the two and choose the right one for you.

Important Factors to Consider Before Leasing or Buying a Used Car

Monthly costs

If you just want to make low monthly payments, then leasing is the best option. Most leasing options have low monthly rates. However, remember that the monthly payments won’t end in car ownership. This means that you will have to lease again, which means more monthly payments. Additionally, you may also have to purchase comprehensive and collision insurance coverage. When leasing a car, it may also be a good idea to purchase gap insurance. Other costs that you may incur when leasing a car include acquisition fees, disposition fees, and early termination fees.

Overall costs

If you’re thinking of purchasing an affordable car, then you should consider used cars. To finance a new car, you will need a down payment, which could be 10 to 20 percent of the car’s value. A used car is the key to a more budget-friendly down payment.

Leasing a car also requires high upfront costs, including down payment and the first month’s payment. While car leasing may be more cost-effective than purchasing a car, remember that you will be putting a down payment on a car that you will not own.

Whether you’re leasing or buying a car, you will still incur maintenance and repair expenses. Most cars are leased for about three years, so a brand new lease will most likely be under warranty. However, you will still have to pay for maintenance and some repairs. Additionally, you have to replace worn tires, minor blemishes, and scratched windows before returning the leased car.

If you purchase a car, the older it gets, the higher the cost of repairs. Therefore, budget for regular maintenance. Fortunately, after you pay off the car, the money you spent on monthly payments can help cover maintenance costs.

Flexibility

For some drivers, being locked into one car for a long period isn’t appealing. If this sounds like you, then you may want to consider leasing a car. Leasing can be a great option if you want to change cars after every few years. However, it is not as flexible as you may think. Breaking your lease could cost you some steep penalties, and you may have to cover the cost of the remaining lease period. On the other hand, owning a car gives you more freedom to trade in or sell.

Bottom Line

As with any other major financial decision, you have to weigh between buying and leasing a car. Buying a car is a sound financial long-term decision, but leasing a car gives you up-to-date features and technology. Ultimately, the decision will depend on your budget, your preferences, and ability to take care of future expenses.