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Published April 21, 2021
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When it comes time for your next (or first) car, there are many decisions to be made. Landing on a budget involves exploring the financial costs of buying new or used or leasing a new car. While purchasing a used car is generally thought to be the best financial decision due to the fact that you can beat many of the high costs of depreciation, leasing has become very popular in recent years.
In a lease, you aren’t paying on the principal of a car note. Your lease payments pay down the part of the car that depreciates while you are driving it, plus any interest. On a purchase, you are borrowing the entire sales price plus taxes and other fees and paying on that amount for a set number of years until the whole amount is paid off. Once you’ve fully researched buying and leasing options, you should be able to make an educated decision on the one that best fits your needs.
Leasing a car is similar to renting a house or apartment. These types of agreements are generally good for anyone who only foresees driving a car in the short term as most lease agreements are up after two or three years. However, the biggest hassles most lessees encounter include mileage limits (literal restrictions on how many miles you can drive a car per month,) as well as strict requirements for maintenance and upkeep.
There are downsides and benefits of leasing a car, truck or SUV. Before you sign a new lease deal on a car, consider the following:
While all those points might make it seem like leasing is definitely the best way to go, there are definite downsides to driving a leased car that you should be aware of:
A new or used vehicle is most likely one of the largest items you will purchase outside of a home. For most people, this involves negotiating on a reasonable purchase price and financing, which will factor into the total cost of owning and driving your new car. Buying a new or used car is generally beneficial for drivers with good credit, as this determines the interest rate on a car loan to finance the deal. A better credit score and a higher down payment generally translate into lower loan payments while poor credit and less money down mean higher monthly payments.
Because of these money factors, you need to assess if purchasing your next car is right for you at this time. If you're considering buying a car, these are some major points to consider.
While purchasing has some stand-out advantages, there are disadvantages when compared to leasing a vehicle. Here are the big ones:
There is no definitive answer to whether leasing or buying a car is better for anyone. This is a personal decision where you have to weigh your wants and needs and come to the conclusion that best fits your situation. Knowing your budget, how often you like to switch into a newer vehicle, the number of miles you need to drive, the type of vehicle you’d like to drive and any other personal details that affect your decision will be helpful when deciding whether to lease or buy your next vehicle. Doing your research on the costs of buying or leasing your desired car, truck or SUV will also put you in a good place to get into a new driver’s seat.