Pros and Cons of Leasing vs. Buying a Car
Is it time for a new vehicle? Maybe your current car has some wear and tear, or perhaps you’re looking to trade in for an upgraded model. Either way, one of the first decisions to consider is whether you want to buy or lease.
The choice between buying or leasing a car can be hard. On one hand, leasing often means lower monthly payments in a newer model year. On the other hand, buying a car offers more flexibility, and you own an asset in the end. Ultimately, the choice comes down to your priorities.
Since the pandemic, the car industry has changed in many ways. With more people going remote and driving less, shoppers are reassessing what they need from their vehicles. Compare the pros and cons of leasing vs. buying below to see which is the right investment for you.
Leasing vs. Buying: What’s the difference?
The main difference between leasing vs. buying comes down to ownership. One way to look at leasing is like an extended rental agreement. When you lease, you only pay for a portion of the car – how much it depreciates in value over time – and return it to the dealer once the lease is over. Overall, leasing is an alternative to buying that can have a lower upfront cost. It’s important to note, however, there are some restrictions to leasing, such as mileage limitations, which require you to pay a fee for every mile you go over the allotment.
Most people are familiar with buying a car. You borrow money from a bank or financing institution and make monthly payments until the loan is paid off. Each month, a chunk of the payment goes towards paying the interest on the loan. The higher the interest rate, the higher the payment. As you repay, you build equity until the car is all yours. Purchasing a vehicle grants more flexibility, but it can have long-term costs. For instance, repairs not covered under warranty years down the road may be expensive.
If you like having a vehicle with the latest technology, or you plan on trading in every few years, leasing may be the right investment for you. There are a number of advantages to leasing, including:
- Lower monthly payments: On average, leases have 30 percent lower monthly payments than car loan payments.
- Low (or zero) upfront costs: Many manufacturers offer lease deals with $0 down, meaning leasing can get you a brand new vehicle in the driveway without a ton of upfront capital.
- Warranty coverage: Leases are often covered for the entire duration of the contract with comprehensive warranty coverage. If you’re prone to expensive repairs, this can be a huge benefit.
- Newest technology: Not only are you driving a car during its most trouble-free years but new models are also equipped with the latest technology.
- No buyer’s remorse: If you don’t like your vehicle, you can trade it in at the end of your lease, and if you love it, you can exercise the right to purchase it.
- No reselling: No need to go through the hassle of selling the car, and you don’t have to worry about fluctuations in price when you lease it.
While leasing may sound like an attractive choice, there are also some disadvantages to consider, including:
- Limited mileage: Leasing contracts come with mileage restrictions. This is mainly to control the amount of depreciation in value. If you go over a certain limit, you will be charged per mile – typically between .10 and .40 cents.
- No modifications: When you lease a car, it must be returned to the dealer in factory-like conditions. This means you cannot add modifications or installed accessories like roof rails or new wheels. You must also use extreme caution to not get any stains, tears, or dents on your vehicle. These blemishes can cost you a fee when you return the car to the dealer.
- Additional fees: Even though your vehicle is covered under warranty, you will still be responsible for expendable items like tires, which could cost more than you’re used to on an upgraded model.
- Early termination fees: If you are adamant about changing vehicles or you can’t afford monthly payments, trying to end your agreement early can be pricey.
If you want to get the most value from your car and don’t mind driving older models, buying a car can be a smart choice. While monthly payments may be higher, every payment goes towards equity, where you will eventually own the vehicle outright. The longer you keep a vehicle after the loan is paid off, the more value you get out of it too.
- Unlimited miles: Buying a car offers more flexibility in the sense that there are no mileage restrictions. If you’re a road trip fanatic or commute long distances for work, this is an important factor to consider.
- Long-term value: If you keep a car past the life of a loan, you will eventually have zero payments.
- Lower insurance costs: Insurance costs are generally lower on vehicles you own.
- Personalization: When you buy a car, you can modify it to your wants and needs. If you need help finding the right parts, contact our team or check out our parts and accessories e-store.
- Less stress: No need to sweat minor cosmetic issues like stains or dents when you own your vehicle.
Though buying a car has its perks, it might not be the right investment for you. There are some downsides, including:
- Higher monthly payments: When you purchase a car, payments are likely to be higher. Compared to leasing, you may also have to settle for an older model year to make it fit your budget.
- Down payment required: For the most part, new car purchases require a down payment. Check with the finance department before committing to make sure you’re getting the best deal possible.
- Long-term maintenance cost: Owning a car for many years can come at a price. If your vehicle is no longer covered by warranty, repairs or long-term maintenance work like brake replacements can add up. At United Nissan Reno, you don’t have to compromise on the warranty coverage. All new Nissan models purchased at United Nissan Reno come with a Never-Ending Warranty – unlimited time, unlimited miles.
Should I buy or lease my car?
The bottom line is that leasing vs. buying a car comes down to your priorities. To make sure you’re making the right investment, evaluate what is most important to you. If your goal is to have low monthly payments and drive a new model every few years with little hassle, then leasing may be worth it. Just remember to assess whether you can handle the limitations on mileage and wear and tear. By contrast, if your goal is to get the most value for your money long-term and you need flexibility, owning a car will be a better fit.