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Buying or Leasing a Car: Which One is Right for You?

Jul 7, 2016

So you’re thinking about getting a brand new set of wheels? You have a lot of decisions ahead of you. After you’ve researched your desired make, model and color, you’ll need to decide how you’ll pay for it. When it comes to leasing vs. buying a car, not everyone is clear on the details.

What does leasing a car actually mean? What are the advantages of buying? What will be better for you in the long run?

The “right” decision between buying and leasing is debatable, and requires some personal consideration about lifestyle and current financial situation.

Buying vs. Leasing a Car
Here is a quick breakdown of leasing and buying a car.

Buying a Car
Buying a car means either paying cash in-full, which few people can afford, or making monthly payments on an auto loan until the car is paid off. While this option often requires a higher initial and monthly payment, it also leads to eventual ownership, which allows more freedom to do what you want with the car (including the option to sell it yourself or make modifications). Another great aspect of buying is that once your car is paid off, you won’t have to make monthly payments, which isn’t the case if you’re a habitual leasee.

Leasing a Car
Leasing a car, similar to renting an apartment, involves monthly payments made out to a leasing company over a certain amount of time (usually 2 to 3 years). With a lease, you’re more likely to pay less money up front and have lower monthly payments; while this might sound great, the downside is that you will retain no ownership of the vehicle. At the end of your lease, you have the option to buy the vehicle or give it back to the dealership.
Leases also come with mileage restrictions and maintenance obligations. If you exceed a certain number of miles, or incur significant wear and tear on the vehicle, you will be charged additional fees at the end of the lease.

Buying or Leasing: Making the Right Decision for You
So which is better: buying or leasing a vehicle? It depends on your own personal financial situation and lifestyle choice.

You may want to lease a car if you:

  • Want to pay a lower initial payment
  • Want lower monthly payments
  • Enjoy driving a new car every few years
  • Drive lower than the average mileage per year

You may want to buy a car if you:
  • Have more savings for a bigger down payment
  • Eventually want to eliminate monthly payments
  • Want to keep your car as long as possible
  • Have driving habits that exceed normal mileage

Want to crunch the numbers yourself?  Visit the Lease vs. Buy Calculator on our website to weigh the pros and cons of buying or leasing your next vehicle.

erin_elis

Erin Ellis
Accredited Financial Counselor
Philadelphia Federal Credit Union
eellis@pfcu.com


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