Consumers are always looking for a smart deal. Nowhere is this truer than when shopping for a new vehicle. Whether it’s a new car, crossover, SUV, minivan, or pickup truck, the new vehicle has to make sense for the consumer’s needs – and be priced right. But with new car leases often very tempting, you may be making the wrong move. Here are five reasons to buy rather than lease your next new car.
You own your car at the end. Perhaps the biggest benefit of buying as compared to leasing is that once you pay off the note, you own the vehicle free and clear. When you lease, on the other hand, you have to turn in the car and you’ve got nothing to show for it except a lot of monthly payments for something you essentially rented. Your only choice is to opt for another lease, buy a used vehicle or, if you’ve been able to save up the down payment, to buy a new vehicle. If you go for another lease, you may find that the lease deals available then aren’t quite so attractive – but you need wheels, so you’re likely to pay more than you want.
If you own your car, you have trade-in equity. When you buy, rather than lease, you have something tangible to work with when it comes time to get another or replacement vehicle. You have trade-in equity that can help lower your outlay on the next vehicle. When you lease, however, you have no trade-in equity. You’re basically starting from zero.
No mileage and wear-and-tear limitations. Naturally, you’ll want to take care of your vehicle, whether you buy or lease it. But if you wind up leasing, you’ll have to keep track of your mileage, as over-limit miles can cost you plenty come the end of the leasing term. Ditto any excess wear-and-tear limitations as stipulated in your leasing contract. When you buy, there’s none of that to worry about. Keep in mind, though, that higher mileage on your car may mean it’s worth less on a trade-in or resale value.
You can sell your car whenever you like. When you buy, rather than lease, you won’t be subject to any early termination fees. If you want or need to get out of your vehicle you can sell it at any time without penalty. When leasing, you are likely to be hit with stiff penalties for ending your lease contract earlier than its scheduled termination date.
Monthly payments may be higher, but you wind up the winner at the end. What drives many consumers to lease, rather than buy, is the lure of lower monthly payments. While there is no question that leasing offers monthly payments that are generally lower than when you finance a vehicle, what happens with a purchase is that you’re paying off the vehicle’s entire purchase price, plus interest, finance charges, taxes and fees. In leasing, you’re only paying the vehicle’s depreciation, plus interest or rent charges, taxes and fees. At the end of your loan term on a purchase, you’ve got something for all your monthly payments, versus all that money out the window in a lease contract.
Sometimes, it may make more sense to get into a leased vehicle rather than to buy. If you typically change cars every two to three years and don’t want to own an older used car, maybe leasing is right for you. But as a purely financial consideration, along with the peace of mind knowing you own your own car, buying is often a much better strategy.