Leasing vs Buying

May 7, 2024

Leasing vs. Buying a Car: What You Should Know

Ready to go car shopping? Understanding the pros and cons of leasing versus buying a car is key to steering your way to a smart choice.

Leasing a Car: The Ups and Downs
Leasing a car can be an attractive option for many, especially if you enjoy driving a new vehicle every few years. However, inventory constraints and high monthly payments are prompting many customers to shy away from leasing. In 2022, only around 20% of all new cars in the United States were leased, a decrease from 34% in 2017, according to Cartelligent. Let's explore the pros and cons to help you make an informed decision that aligns with your lifestyle and budget.

Pros of Leasing:

  • Latest features: The average car lease is for two years. As a result, leasing allows you to enjoy the latest models with up-to-date technology and safety features.
  • Maintenance: Many leases include maintenance, reducing the worry about upkeep costs. However, you’ll have to head to the dealership for every oil change or minor repair, which can be inconvenient. 
  • No resale hassles: At the end of a lease, you simply return the car to the dealership. You don't have to worry about the resale value or the process of selling the car, which can be time-consuming and potentially costly. 
  • Low down payment: Leases typically require a lower down payment than buying a car. In some cases, you might even find lease deals with minimal or no down payment required. 

Cons of Leasing:

  • Mileage restrictions: Leases typically come with mileage limits. Exceeding them can result in hefty fees.
  • Wear and tear charges: You could face additional charges for damage beyond "normal wear and tear."
  • Limited customization: Since the vehicle is not yours, you’re limited in how much you can customize it. Any changes might need to be reversed before returning the car.
  • Insurance costs: Leased vehicles may require higher insurance coverage and, therefore, higher insurance premiums. Lessors often require comprehensive and collision coverage with lower deductibles.
  • Early termination fees: Lease agreements typically include penalties for early termination, which can be substantial.

If you decide to lease a vehicle, choosing a reliable car with high resale value is advantageous. A reliable car typically depreciates slower than a trendy vehicle, which can help lower your monthly payment. Don’t be afraid to negotiate with the dealership to lower the capitalization cost and reduce your monthly payments. Lease payments are calculated based on the difference between the car's “cap cost” and its expected residual value at the end of the lease term, divided over the lease period.

Buying a Car: The Long-Term Perspective
Purchasing a car is a long-term investment and is nearly always cheaper than leasing a car over time. But, buying does offer a different set of advantages and considerations.

Pros of Buying:

  • Ownership: When you buy a car, it's yours. You have the freedom to customize it and drive it as much as you like without worrying about mileage limits.
  • Long-term cost savings: Although buying a car requires a higher upfront cost or financing, you save money in the long run, especially once the car is paid off.
  • Resale value: You can sell the car at any time and use the value for your next vehicle.

 Cons of Buying:

  • Higher monthly payments: Financing a car usually results in higher monthly payments when compared to leasing.
  • Depreciation: Cars depreciate quickly, and the resale value decreases significantly over time.
  • Maintenance costs: As the car ages, maintenance costs can increase, especially after the warranty expires.

Interest Rates and Your Decision
Interest rates play a crucial role in your decision to lease or buy. Higher interest rates can significantly increase the total cost of buying a car. In contrast, leasing companies often offer attractive leasing terms, even with higher interest rates, making leasing more appealing in certain economic climates. In 2024, economists anticipate inflation will continue to slow, and the Federal Reserve will start to cut interest rates, making financing a car cost less.

Why Choose Milex Complete Auto Care?
Whether you decide to lease or buy, maintaining your vehicle is paramount. Milex Complete Auto Care offers comprehensive maintenance services to keep your vehicle in excellent condition, which is crucial for retaining its resale value, especially if you decide to buy.

We stand out due to our commitment to quality service and customer education. We understand the nuances of leased and purchased vehicles alike, offering tailored services to suit each vehicle's specific needs. Our expertise in the latest automotive technologies ensures your vehicle receives the best care possible.

Visit Your Local Milex
Whether you lease or buy, Milex is here to provide top-notch maintenance services to keep your vehicle running smoothly and efficiently. Stay road ready with Milex!

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