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Now that my friends and I have entered our late 20’s (cringes), the cars we were driving in high school are over 10 years old and it may be time for a new one. Since high school, I’ve had four cars, including the one I’m driving now. Of the five vehicles I’ve had during my lifetime, three were leased and the other two were purchased for me. Lately, I’ve had a lot of friends who know I’ve leased cars, come to me and ask the difference between buying and leasing. While I won’t pretend to be an expert, I’ve learned a few things the past few years that I’m happy to share with anyone with a similar query.
1. Own vs. “Rent”
I like to think of leasing as a “long-term rental”. You pay for it every month, but isn’t your to keep! When you buy a vehicle, you’re payments are going towards you one day receiving the title (and not having to make monthly payments). Not having a car note (even if it takes a few years) is a GREAT way for royals on a budget, to have a few extra coins.
2. Upgrade Every Few Years
If you’re super into cars and having the latest technology, leasing will appeal to you. Most leases last for three years and then you can upgrade to the latest model. Now, that’s a SUPER simplified way of explaining it, but leasing pretty much allows you to get a new car every few years!
3. Saving Money Upfront
This here is the reason I lease. Many dealerships offer “no-money down” to well qualified leasees. This has allowed me to walk into a dealership, essential pay nothing or maybe my first month’s car note, and drive away with a brand new vehicle. This is ideal for Royals who don’t have a few thousand dollars saved up to go toward a down payment, taxes, and other fees associated with purchasing a new vehicle, but are in need of a car.
4. Cheaper on a Monthly Basis
Before I got my current leased vehicle, I just knew I was ready to buy a car, or so I thought. We went to the dealership and had them run the numbers for a lease and purchase. I was SHOCKED to learn the monthly car note on a buy was quite a bit higher than the monthly car note (on the same vehicle) for a lease. The salesmen explained to me when you buy a car, your loan value is based on the entire value of the car. Whereas when you lease a car, your loan value is only for the depreciation that will occur during the terms of your lease plus fees. For example, if the car you want costs $30,000 and you have $3,000 for a down payment, to buy the car the amount that must be financed will be $27,000. If you lease this same car, and the predetermined residual value is calculated to be $15,000, the amount financed would only be $12,000. Obviously, your payments on a $12,000 loan will be considerably less than those on a $27,000 loan.
While I’d probably recommend leasing over buying to most of my friends, I think there are a few things that are important to bear in mind:
- The car isn’t yours. You’re basically making payments to no end.
- You still have to pay taxes on the car. You’re paying taxes on something that isn’t even technically yours!
- You’re financially responsible for maintenance/repairs. Again, investing in something that will never be yours.
Regardless of if you decide to buy or lease your next vehicle, it is important that you ensure you are getting a car that is safe and reliable and that you and your passengers are safe while riding. Last week was Car Seat Safety Week and as a Public Health professional outside of the blogging world, I’d be remiss not to use this opportunity to remind all of my Royals the importance of avoiding distractions while driving and securing precious cargo (i.e. kiddos). Cars.com has put together an awesome guide on how to conduct car seat checks that is useful for parents or anyone responsible for transporting children. Be sure to consult the guide here and pass it along!
Do you buy or lease your vehicle? What’s your reasoning for buying? What’s your reasoning for leasing?
All images are courteous of cars.com or are from a stock-photography site.