The Basics of Buying vs Leasing Vehicles
When it comes to buying and leasing, there are so many moving parts that we simply can’t cover them all here. However, we want you to at least know the basics of each.
That way, you can decide if you should buy or lease a vehicle.
Leasing a New Vehicle
Whe leasing, you’re essentially renting a vehicle. The cost depends on a lot of factors, but at it’s most basic, you have to pay the amount the vehicle will depreciate. So, say you want to a three-year lease on a brand-new midsize sedan that MSRPs for $30,000. Over the next three years, its value is expected to drop to $12,000. Your monthly payment be that difference in price ($18,000) divided by the number of months on the lease, plus upfront cost and interest. These payments are usually much lower than buying a new vehicle. However, there is an annual mileage limit on a leased vehicle and a lease is binding contract.
Buying a New Vehicle
Buying is probably how most people view getting a new vehicle. It involves paying the entire amount of a vehicle’s value over a long period of time. How long varies based on down payment, annual salary, financing rates, credit score, and more. This is a much more complex process than leasing, but it also leads to legal ownership. That means you can sell your car at any time after you buy it, regardless of your loan terms. Given that more value needs to be covered and that loans repayment rates are usually longer than leases, you’ll pay much more for the vehicle itself and in interest.
Buying a Pre-Owned Vehicle
If you’re looking for the most cost efficient way to get a new vehicle, then the best way to do that is by buying a used one. Since new vehicles lose so much of their value with the first couple of years, buying a used vehicle with low mileage at a low price is super easy. A relatively small down payment on new vehicle is magnified for older vehicles with lower prices. And if you buy an old enough vehicle, sometimes that down payment can equal half—or even all—of the vehicle’s price. Buying used is a great blend of the affordability of leasing and the ownership of buying new.