Buy vs. Lease – Understanding Your Car Finance Options

Buy a new car! Buy a used car! Lease a car! Don’t buy a car — walk! Ride a bike!

Oh boy. There’s definitely a lot of different opinions out there, aren’t there? One minute you think that you’re making all the right moves within your life, only to find that you might be only looking at part of the situation. No matter how you got to this point, you might be in the market for another car. If it’s not brand new, then it’s at least new to you. And that’s what really matters, right?

Well, the truth is that you have choices. You can finance a new car, finance a used car, or even lease a car. But how do you know what the right decision is? Don’t you want to make the right decision? Of course you do! But when you look online you might still look around at all of the different thoughts on the subject and still not know what to do. Sometimes that’s the downfall of personal finance sites — there’s so many people saying different things that you might not realize what to do. You just have to make sure that you take a stand and base your decision on what’s right for you!

So, how do you figure out where you should go in the “buy vs. lease” tent? That’s what we’re going to cover today.

First and foremost, you have to understand how leasing works. Yes, the benefits are many. You’re going to basically get into a new car every few years, but the downside is that you will not have any ownership of the car. This means that you will need to pay full coverage insurance and you will need to make absolutely sure that you are careful with the car. Any accident damage has to be fixed immediately, and that means that you need to push forward and take action right away to make sure that you will be alright in the long run.

Mileage is another thing. Drivers that long to do big road trips might find that leasing really isn’t the answer that they’ve been looking for. You have to estimate the number of miles that you will drive each year. The leasing company will only give you so many miles to go around. If you blow through them, you’re looking at a lot of money when you turn the car back in.

Yes, it’s nice to get a new car every few years, but what about when you own a car that you don’t have to make any payments on? Constantly leasing a car is much like renting a house. Yes, you get the benefits of having a roof over your head, but its’ not like you can make any changes or hardcore customizations. You have to ask permission for everything. And when changes are allowed, they’re expensive — see our notes on mileage in the last paragraph if you don’t believe us.

There are certain people that do benefit from leasing, lest you think that we are throwing out the whole baby with the automotive bathwater here. Self-employed people may be able to write the leasing payment off as a business expense. They’re going to need to check the vehicle rules with the IRS to make sure that they don’t land in hot water before they try to do this. Taking it out in the name of your corporation also helps as well so that there’s no issue of personal liability.

There are some good points to buying your car outright. For starters, you’re going to have a lot of low-interest financing and cash-back offers — especially if you have good credit. That’s because dealerships and automakers as a whole want to make sure that you’re getting into a good car. However, it’s hard to stem the flow of people that buy a car once every 7 years compared to people that buy a car once every 2 or 3 years. Leases turn over a lot faster, because you want to get from one new car to the other. This is also a great time to figure out what you really want to end up owning. Yet if you’re going to do that, you can also rent a few cars and drive them around town to see what you really like and what you don’t like. There’s no point in just spinning your wheels trying to figure out where to go next if you know what you want.

There’s nothing wrong with owning a car outright, and there’s nothing wrong with leasing. You just need to find out what’s really going to work for you and stick to that. That’s what we think you should focus on, anyway! Good luck out there!

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