Within the past few years, car sales in the United States have skyrocketed thanks to advancements in technology and overall industrialization. This essentially means that people are buying new cars at a higher rate than ever before.
But one stressful question that plagues many car buyers is whether they should lease or buy a car. It’s a very valid question to stress over, as there are many pros and cons to doing both.
Luckily, we’ve compiled a short guide on which is the better choice for your situation. If you’re planning on buying a car in 2022 and don’t know where to start, keep reading for more info!
Leasing A Car: What Does it Entail?
We’ll start off by giving a short rundown of what leasing a car looks like, as many people get confused by what it means. In general, leasing a car means that you’re renting a vehicle directly from a car ownership or dealer for a certain period of time.
This length of time varies depending on how new the car is and its price/mileage. Once that designated time is up, you have two options.
One, you can buy the car at a pre-determined amount (usually the remaining balance + extra fees). Or, you can return it and start another lease on a different car.
Payments for Leasing
Lease payments are much smaller in comparison to loan payments for a car. There are many factors that go into determining the price of your lease. Some of which include:
- Expected mileage
- Length of the lease
- Residual value (the price of the car at the end of the lease)
- The sale price. This is occasionally something you can negotiate with the dealer
Loans are generally much heftier in price than leases. A dealer might require you to put a down payment on the car lease. The more you put down, the smaller the lease payments will be.
Pros and Cons: Leasing a Car
The biggest pro to leasing a car is that you’ll have much smaller car payments. Some people use this to their advantage to lease a luxury car at a significantly smaller price than buying it. On that note, you can lease a brand new car every few years— nice isn’t it?
In addition, many leased cars come with hassle-free maintenance and a warranty that lasts a few years. You also don’t have to worry about reselling the car, such as buying a car would entail doing.
Now for the downsides. When you lease a car, you lose out on car equity. You also can’t customize the car, have limited mileage (around 10,000 miles per year on average), and are responsible for damage outside of the warranty.
Lastly, you don’t own the car unless you decide to buy it.
Should I Lease or Buy a Car?
Taking all these factors into consideration, leasing a car would be the best choice if you aren’t sure if you want the car in a few years. It’s also a great option for those with smaller pools of income or those with financial struggles.
Buying a car is good if 1) you know you want that car 2) you don’t mind paying off the loans and 3) you’re good at haggling and can sell it off a few years later.
On the topic of loans, you’ll want to get the best deal possible if you decide to buy the car upfront. For some great options, look here. You can also finance the car if you so desire, which builds up equity over time (saving you money)!
Just be prepared in advance to put down a full cash payment or sign up for a loan.
Need Additional Help?
We hope this short guide helped you answer the question of ‘is it better to lease or buy a car?’ There’s much more that goes into this debate. Your best bet would be to talk with a financial advisor with expertise in car loans.
For more helpful auto & finance tips, visit the ‘buy a car’ section of our blog!