Consumers seem to construct a great divide between leasing versus buying a car, which can lead to heated debates in the auto world. The Edmunds automotive website believes this subject can be as touchy as discussing religion or politics. The question of leasing versus buying works on a financial as well as an emotional level. Some people want cheap; others want style.
Keeping Five Years
To compare apples to apples, so to speak, you have to define the terms before you can adequately compare leasing new versus buying used. For this example, you are going to compare the two options as if you are going to keep the car for five years, which is the average length of time people keep their cars, according to Edmunds.
Leasing a new car is an attractive option because the price to purchase a new car can be unaffordable. Leasing’s main advantage is that is gets you into a brand new car with a low, or even no, down payment, lower monthly payments and lower sales tax. You only pay tax on a leased vehicle based on the amount of the car’s value you use, according to Edmunds. You may have to pay more for insuring a leased vehicle than you would for a new car, and you pay much more to insure a leased car than you would for insuring a used car. Most leases are for three years, but since this example is for five years, you’d initiate a second lease on the same car. Your payments will probably be higher with the second lease, according to Edmunds.
About Buying Used
When you buy a used car, the price is much less than buying the same model new. If you buy from a dealer, you typically make a down payment and take out a loan to pay the balance. If you take out a three-year loan to pay for the car, you have no more car payments after that, and you can still drive the car. You should probably figure paying more for repairs and maintenance than you would if you lease a new car. You pay much less for insurance, though. Once you pay off the car, you can choose to drop collision coverage and just have liability. The real benefit to buying used is the potential savings you see by driving the car years after you are done with the car payments.
In the long run, leasing is the more expensive option between leasing new and buying used, and in fact, is more expensive than buying a new car, because at the end of the day, you have no equity and no car with a lease. The real draw to leasing over the long term is the pleasure you can get from driving a new car that you can’t get from a used one. And, you won’t have to spend as much time at the auto repair shop when you lease a new vehicle. Consider what your goal is in selecting a car before you make your decision.
- woman coming out of her car image by jeancliclac from Fotolia.com