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Car Buying Or Leasing: Which Is Better?
Buying a car is not the only option on the market when you are car shopping. Leasing is a secondary option that not as many people consider since most associate “leasing” with “rental”. In a way, leasing is like a rental, but with more perks. But which is better: buying or leasing? Well, the answer depends on how you live and how often you drive.
Buying is what most people do, but what if you’re not in a position financially to afford a new car? Leasing can be more restrictive, but also more affordable. To get a better idea if buying or leasing is the right decision for you, continue reading to learn the pros and cons of both.
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Buying a Vehicle
Buying a car is often a lengthy process for the average person. Unless you have a high amount of disposable income, buying a car takes planning, budgeting, and potentially some compromise. There are several steps involved in the vehicle buying process, which include:
- Knowing What Kind of Shopper You Are: Are you looking for a car based on the appearance it will give, or because of the safety features it provides? Thinking about what matters most to you, such as the price versus the model of car, can help you begin your process in choosing cars to keep your eye on while shopping. This choice should also be influenced by your lifestyle choices, as the car is often an extension of how we lead our lives.
- Compiling a List of Potential Vehicle Choices: This step combines a number of other steps that will help you later on in the process. By compiling a list of what you want or need in a vehicle according to your preferences and lifestyle, this list will help you to narrow your options down. People can become anxious from having too many choices, so your choice should be accommodating and appropriate for your lifestyle. If you intend to share the vehicle, it might also be helpful to compare options with the others who will be using the car to ensure that everyone’s needs and preferences can at least be considered in the final decision.
- Budget and Calculate Affordable Payments: Having every piece of new technology in a new model is nice, until you see the price tag and try to rebuild your budget around the monthly payments and maintenance. Purchasing a used vehicle is typically easier to save up for the down payment and make monthly payments for, but the maintenance could be more costly. A new car may save you on maintenance and labor in the beginning, but you will want to take into consideration the initial costs including the invoice fees, MSRP, and the fair purchase price range. So, calculate in your budget what you can feasibly afford before setting your sights on the car you think is perfect for you.
- Research Options, Dealerships, and Insurance: Outside of what the car needs to provide you, make sure to spend some time gathering intel on what others say about each model you are looking at. What do they like best and hate most about each car? What is the car’s safety rating? Who is offering each model at the best price? How much does it cost to insure the car? Spending a couple days on gathering these types of information can save you additional time and money in the long run because you will decrease the chance of you investing in a car that may have unfortunate surprises.
- Get Proper Financing: Having pre-approved financing and savings will help to calm the anxiety of handing over a hefty down payment for the vehicle. Having a pre-approved auto loan can help to provide you with negotiating power with the dealerships, as they will want you to finance the car through the dealership, especially if you are looking to purchase a brand-new car. In the process of funding your new vehicle, it might also help you to try to purchase around the most popular sale times or during the winter. It doesn’t hurt to check out if there are any other discounts that you might qualify for as well. Selling or trading in your current vehicle can also be an initial or last resort approach to funding your replacement vehicle.
- Take a Lengthy Test Drive: Remember when deciding on a vehicle how much time you will be spending in it. Do you like to take road trips, or do you travel frequently for work? Make sure to explore the car and learn more about it by taking a longer test drive. Go back to the dealership a few times to test drive it, if possible, because purchasing a vehicle that you cannot comfortably drive or sit in for lengthy periods of time will make you regret your decision.
Leasing a Vehicle
Leasing a vehicle has a similar process to buying, in that you will want to plan accordingly and keep in mind the differences in how leasing works compared to buying. Leasing is a contractual agreement you make with leasing companies, so the steps vary slightly from buying a vehicle.
- Compare Leasing Companies: Don’t immediately sign a contract with the nearest company available to you; remember that although you are leasing a vehicle, you can negotiate prices, so leave some room to find the company right for you. Look into each of their reputations with the public; what do you people say about each leasing company? Do they have reliable customer service? Are their policies reasonable and accommodating to customers’ needs?
- Establish Your Lease Contract: When discussing the details of your contract (how long you will have the car, warranty, insurance, price, etc.), you will need to discuss the mileage you will need or that you are allotted. Think about how much you can currently afford to pay for the car every month.
- Negotiate For Your Needs: Everything is on the table for negotiation when leasing a vehicle, from your payments to the type of vehicle you are looking to drive. However, the type of vehicle will depend on what is available at each company. It can be helpful and worth your while to check out which company is currently offering discounts on leasing deals.
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Purchasing a Vehicle Pros and Cons
Freedom of the car you buy, of the driving you do, and what the car looks like after you drive it off the lot are all perks of buying a vehicle. But the price tag for one car you will most likely drive for the next 10 or 20 years can be daunting for people. But if you travel for work or pleasure, buying a vehicle will most likely be your best option.
- You Own the Vehicle at the End of the Loan: Auto loans may be longer than a leasing contract, but at the end of the loaning period, you will own the vehicle. The average auto loan is paid over the span of 68 months.
- You are Free to Customize the Vehicle: Because you are making monthly payments to own the vehicle you are driving, you have full reign to make any customization choices you want (within state regulations, of course). This means you can paint the car a new color, decorate the inside and outside with decals, install additional technology and so on.
- No Mileage Limitations: Unlike leasing a vehicle, no one can restrict you on how many miles you drive. Buying a vehicle means you have complete control over how many miles goes on it each month.
- No Diligent Care Requirements: Diligent care refers to overall cleanliness, as every care needs diligent maintenance to keep the vehicle in operation. But when you purchase a car to own, how clean you keep it on the inside and out is up to you. You can eat in the car without necessarily worry about stains on the upholstery, or choose to smoke in the vehicle, which are two examples that you often cannot and should not do in leased vehicles.
- Higher Payments: The one main con of purchasing a vehicle is that the payments are overall higher. The average monthly payment for a car is around $550 per month, not including the gas, insurance, and maintenance. This is the primary factor when choosing a vehicle
Leasing a Vehicle Pros and Cons
Leasing a vehicle is a more controlled process that involves contracts and regulations, unlike purchasing a vehicle, but it is an option worth looking at regardless, in case you fit into the category of people who would benefit more from leasing. Leasing can be cheaper, more flexible with the type of car you get, and is best suited for those who do not drive often or who will not need a car after the contract ends.
- You Can Get a New Car Every Three Years: The recommended time frame that you should consider leasing a vehicle is three years, but the time frame is up to you and your leasing company. However, the pro of leasing a vehicle is that every time your leasing contract ends and you want to lease another vehicle, you can! So, you don’t have to worry about picking the “right” car because you can try them all if you want and can afford to do so.
- Lower Payments: Unlike purchasing a vehicle, the initial down payment and monthly payments are lower. On average, the down payment is $1,000 (this covers the “drive-off” fees) with the monthly payment being around $470. This is slightly less than the average monthly payment if you were to purchase a car, but the down payment is significantly less.
- Taxable Monthly Payments: You may not be able to tax the entire vehicle like when you purchase one, but you are able to write off the monthly payments on a leased vehicle.
- Option to Buy Leased Vehicle: At the end of the lease contract, if you’ve come to love the car you’ve been driving, it could be possible to discuss purchasing the vehicle before you hand the keys back. This would mean higher monthly payments, so you would want to account for that.
- Do Not Own the Car at End of Contract: Even though you make monthly payments, at the end of the lease contract, you do not get to keep the car. On average, people pay over $26,000 for a car they will not own by the end of their contracts
- Strict Care Regulations: You cannot smoke in most leased cars, and you need to be extra careful to not spill drinks or drop food. The car also must be retuned with a full tank of gas. If you do not stick to their care instructions, then additional fees will be tacked onto your final pay statement.
- Limited Mileage Regulation: Most leased vehicles are only allotted 12,000 miles or so for the entire year. There are “extra mile” leases available, but at a higher price. But on average, every year, you will only have around 12,000 miles available to you, which doesn’t allow for extensive travel or many joy rides.
- Higher Insurance Costs: Although you do not have to carry traditional insurance on a leased vehicle, you still need to pay for the insurance on the vehicle provided through the leasing company. These costs are typically higher compared to when you carry insurance on your own vehicle.
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So, Which is Better: Buying or Leasing?
The answer depends on your current situation of needing a car. Both options lend benefits and challenges. Buying a vehicle is the best option for those who drive constantly, who like to take a drive for leisure, and for those who want the option that will provide the most amount of control. Leasing a car cannot typically provide these perks unless you pay more, in which case, is it worth leasing then? Leasing a vehicle has its perks, too. If you do not drive often, but do need a vehicle, leasing a car is a viable option. Leasing a car, as stated before, can also allow you to try out more cars in less time than if you were to buy a new vehicle every ten years. Leasing is also a great option for someone who may only need a car for a short amount of time, such as moving to an area with public transportation and little private car parking space.
Thanks for reading about buying vs leasing a car.