Car Buying Versus Leasing: What To Consider

Summary

Choosing between buying and leasing a car involves more than just financial considerations. While leasing offers the allure of driving a new car with the latest features, buying a car can provide long-term value and ownership benefits. This article explores the nuances of both options, backed by statistics and expert opinions, to help you decide which path suits your needs best.

The Popularity of Leasing

Leasing has become an increasingly attractive option for many consumers. According to Edmunds, car leases rose by 21% last year, a trend driven by rising car loan rates and the desire for the latest vehicle models.

Expert Opinions

Experts at CNNMoney emphasize that the decision to lease or buy a car isn't solely about finances. They state, "It depends on the intangible importance you give to owning a new car. If the image of driving the latest model is essential to you, then you'll justify spending more money for this privilege. If you look at a car as merely transportation, then owning the newest car on the block will be lower on your priority list."

Financial Considerations

Buying a Car

When you buy a car, you have the potential for years of relatively low-cost driving after the loan is paid off. According to the U.S. Department of Transportation, the average lifespan of a vehicle is 13 years, with a final mileage around 145,000 miles. Half of all vehicles on the road today are at least eight years old.

For example, if you buy a new car and drive it 14,000 miles a year (the national average), by the time you pay off a four-year loan, the vehicle should have around 56,000 miles on it. You can expect, on average, another six years and 84,000 miles of reliable transportation.

Leasing a Car

Leasing a car means you are always driving a new vehicle, which comes with the latest safety features. Leasing typically requires a lower down payment and lower monthly payments compared to a 36-month loan, provided you have good credit. Additionally, maintenance costs are minimal because the car is under warranty.

Advantages of Leasing

• New Car Experience: Always driving a new car with the latest features.
• Lower Down Payment: Generally lower than buying a car.
• Lower Monthly Payments: Typically lower than loan payments.
• Minimal Maintenance Costs: Covered under warranty.

Drawbacks of Leasing

• Continuous Payments: You always have a car payment.
• Limited to New Vehicles: Usually applies to new, more expensive cars.
• No Ownership: At the end of the lease, you have no equity in the car.
• Early Termination Penalties: Stiff penalties for ending the lease early.

Long-Term Value

If you like the car and want to buy it after the lease expires, it will cost you more than if you had bought the car initially and paid off the loan. Ownership can provide years of low-cost driving long after the loan is retired.

Interesting Stats

• Average Car Loan Term: The average car loan term in the U.S. is now 69.7 months, according to Experian.
• Depreciation: New cars lose about 20% of their value in the first year and about 60% by the fifth year, as reported by Carfax.

Conclusion

The decision to buy or lease a car depends on your personal preferences and financial situation. Leasing offers the excitement of driving a new car with lower initial costs, while buying provides long-term value and ownership benefits. Consider your priorities and financial goals to make the best choice for your needs.

For more information on car buying versus leasing, visit Edmunds and CNNMoney.

This article provides a detailed comparison of car buying and leasing, incorporating expert opinions, financial considerations, and interesting statistics to help you make an informed decision.