Buying and leasing a car are two very different things, and each has its own merits according to what you want to get out of the vehicle. While buying tends to make more financial sense in the long run, you may have other priorities that leasing can accommodate, such as a lower monthly payment or a short-term commitment. Read through the benefits of both financing choices to help you decide on your next move.
Benefits of leasing a car
Lower payments – In effect, leasing means you’re paying only for the depreciation of a vehicle over the course of the lease term, plus finance charges. That usually makes the payments lower than those of an auto loan, where you’re paying for the vehicle in full.
New vehicles – If you like to go from one new or late-model vehicle to the next, enjoying the latest styling, technology and safety features, leasing is an easy way to do it.
A bigger or better car – Lower payments may enable lessees to get a larger, more luxurious or better equipped car than they could otherwise afford.
Maintenance is covered – Maintenance will likely be covered by the automaker’s warranty for the duration of your contract – so no unexpected expenses if repairs are needed.
Convenience – Just turn in the vehicle at the end of the lease without having to go through the trade-in or private-sale process.
Benefits of buying a car
Ownership and equity – With an auto loan, each payment you make builds equity in the vehicle until you own it outright. You also have the freedom to sell the vehicle as and when you need to; before the end of your loan if you wish, although you’ll want to check the car’s value against the outstanding balance. With a lease contract, you’re committed for the full term unless you pay an early termination fee.
Value for money – Buying a vehicle is known to be more cost-effective than leasing, especially when compared to back-to-back leases. The longer you keep the car after the loan is paid back, the better value it can be. There are no more monthly payments and you still have the vehicle as an asset.
A head start on your next car – When it’s time to buy another vehicle, the value of your current car can be used as a ready-made down payment. Whether you decide to trade in or sell it yourself, the proceeds can be used to either reduce the cost of your new purchase or add extra dollars to your budget.
No mileage limits – A lease agreement comes with mileage restrictions; normally 12,000 to 15,000 a year, and exceeding the limit could cost you around 15-30 cents a mile. When you buy a car, there are no such restrictions, so feel free to take as many long and winding road trips as you like. Keep in mind, however, that the more miles you put on the car, the more its resale value will decline.
No wear-and-tear restrictions – You’re also not held to any wear-and-tear restrictions when you buy, which could be a good option if you intend to use the car for work.
You can customize your ride – A new set of wheels, a trailer hitch, a paint job. Buying a car makes it all possible, without the need to remove any customization before you part company, as would be the case with a lease.
Loans are easier, especially for people with bad credit* – The auto loan process is often more straightforward than leasing, and there are generally more options for consumers with poor credit.
Whether it’s better to lease or buy is affected by what meets your needs now and over the coming years, so think about how long you want to keep the car. Whatever you decide, look for the best deal on your financing to optimize your choice. And if you decide an auto loan works best, apply online with RoadLoans. We accept applications from consumers across the credit spectrum, and offer a fast, easy process.
* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.