The decision to buy or lease a car is a big deal, particularly for first-timers. So how do you know what's right for you when you haven't got a clue? Don't worry — our experts spill the beans to help you make the most informed choice possible.
Buying saves you big-time in the long run
According to David Bakke, editor of MoneyCrashers.com, it's always better to own a vehicle rather than to lease one. Why, you ask?
"Because if you purchase a vehicle and eventually pay it off, you'll be driving the car without having to put another cent into it beyond gas and general maintenance," he notes. "You also pay less in insurance when you purchase an automobile. You may pay a higher monthly payment, but it will definitely be worth it in the end."
Leasing is great if you don't have much up-front money
On the other hand, if you're just starting out in your career and don't have a ton of up-front money to invest in a car, then leasing may be a better option, points out Bakke.
"At times, there may be no required down payment at all. However, remember that if you go with leasing as a long-term strategy, you'll always have a car payment. Not having this expense in your everyday finances is a great way to free up funds for other financial issues, such as paying off that credit card debt."
Mileage isn't an issue when you own your car
Unfortunately, one main drawback of leasing a car is the mileage fee associated with it, warns financial planner Hank Coleman of Money Q&A.
"Most leases allot 10,000 to 12,000 miles per year, but if you exceed that limit, you are subject to an extra 18- to 21-cent per mile charge."
Eek! That means if the charge is 20 cents per mile driven over the limit and you drive an extra 1,000 miles per year, then when you return the car, you'll pay an additional $200 per year you drove the car.
Leasing is less of a hassle
The great thing about leasing a car is that there's little to no maintenance expense, plus the return process is so easy-peasy! Once your lease is up, all you have to do is turn the car in without thinking about how to sell it or prepare it to get the most money, says chief blogger for DMV.com, Jordan Perch.
"Not to mention, you'll avoid the negotiating and haggling that's inevitable when it comes to selling a used vehicle. You'll also save a considerable amount of money thanks to the fact that only your monthly payments will be taxed — not the full price of the vehicle, which is the case when buying a car."
Buying lowers your insurance rates
Sure, you might be shelling out more each month for your new ride, but insurance-wise, you'll actually be paying less if you buy.
"Leasing requires purchasing collision and comprehensive insurance," says Harrine Freeman, CEO/owner of H.E. Freeman Enterprises.
Insurance rates are often higher when you lease.
"Additionally, if your car gets stolen or is totaled, your insurance will only reimburse you for the current market value, which may not be enough to pay the remaining amount you owe on your lease," says Freeman.
Leasing allows you to drive your dream car for less
Because monthly payments are typically lower when you lease a car, you'll be able to drive the vehicle of your dreams for much less than if you were to buy it! However, keep in mind that you can't make any modifications to the car since you aren't the owner.