Should I buy or lease my new car?

Posted 4 years ago

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When acquiring a new vehicle you always have the choice of whether to buy or lease; the decision you make is more likely to be down to your lifestyle rather than your financial situation, this is why. A lease is probably the best option for those people that don’t drive as often and prefer to avoid the maintenance headaches often encountered when owning a vehicle over the longer term. Buying is probably the best option for those people that drive excessive mileage A lease is probably the best option for people that like the idea of driving a new car every 3 years or so, and are confident they can avoid putting excess wear and tear on the vehicle, like scratches, dings and stains in the interior. Buying is probably the best option for those people that are not concerned about changing their car every 2 or 3 years and expect to see excessive wear and tear on the vehicle. (Kids spilling drinks or scratches to the bodywork etc.) A lease is probably the best option for those people that like the idea of lower monthly payments. Buying is probably the best option for those people that expect to own a vehicle over the long term. If you own a vehicle for 5 to 10 years, the overall cost is significantly lower than the cost of leasing. Whether you end up buying or leasing, the most important thing you have to do is make sure you get the best deal possible on the vehicle. We suggest you read our article, When buying a new car, to ensure you get the best deal available. Leasing a car Although leasing a car is more expensive over the long term, it does carry a number of advantages. Monthly payments are lower because you are only paying for the depreciation of the vehicle over the term of the lease, versus financing the total cost of the car when you buy. The down payment, or deposit, is usually much lower than that required on a traditional purchase, and in some cases a down payment is not required at all. A lease allows people the affordability and flexibility to be driving a new car every 3 years or so. (A 3 year lease is generally the most sensible term to consider from a financial standpoint). You pay less tax on a lease because the taxes you pay are only based on the cost of the lease, rather than the full cost of the vehicle. A lease removes the hassle and having to find a buyer for the vehicle when the time comes to change your car. (If you have done less mileage than the mileage provided for in the lease, and the car is in perfect condition with no excessive wear and tear, the vehicle could be worth more than the residual value on the lease. Under these circumstances, it may be possible to exercise your option to buy the vehicle, then immediately sell it back to the dealer for a profit.) A responsible driver will have lower maintenance costs when leasing because the car should remain under the manufacturer’s warranty throughout the term of the lease. Consequently, any issues with the vehicle that are not caused by the operator should be covered under the warranty. A lease can also provide a few disadvantages that should be carefully considered before signing any lease. All leases provide for a fixed number of miles that can be driven over the term of the lease. If this mileage is exceeded, at the conclusion of the lease there will be a charge that is typically charged at a cost per mile. This cost is likely to be in the region of 20 cents per mile, which can add up quickly. For example, if you exceed the included mileage by 5,000 miles over the term of the lease, you are likely to be charged around $1,000. The mileage allowance and excess mileage fee are clearly stated in the lease – check carefully before signing a lease. At the end of your lease, dealers can charge you for excessive wear and tear, anything from worn tires, scratches or strains to the upholstery. Insurance costs tend to be higher for leased vehicles. Coverage typically needs to include Guaranteed Auto Protection (GAP) insurance. GAP insurance covers the difference between the actual cash value of a vehicle and the balance still owed on the lease. You can get a convenient no obligation free quote at You should also be aware that some leases prohibit relocating the vehicle to another State or Country. Buying a Car When buying a new vehicle most people need to use some form of financing, but regardless of financing or if you are in the position to do so, buying for cash, your main priority should be to get the best deal possible. We suggest you read our article, When buying a new car, to ensure you get the best deal out possible. When deciding whether to lease or buy, many people look at the upfront costs and decide that leasing is the best option, but it’s important to understand that if you intend to keep the car over the longer term, (5 years or more), it makes more financial sense to buy rather than lease. Also, if you are a high mileage driver, a high mileage lease can be very expensive, or having to pay a mileage fee at the end of a lease can be even more costly, so look at the sums carefully, you’re probably be better offer buying your vehicle. When you keep a car over the longer term your loan payments will eventually come to an end and the cost of your insurance premiums will drop. After you have paid off your car loan you will be left with an asset that has a real value, albeit a small portion of the original cost, but an asset never the less! Against this, your maintenance costs will obviously be higher than those on a leased vehicle as, with age, the manufacturer’s warranty will expire and the wear and tear on the vehicle will necessitate more and more maintenance. Having said that, for those people that want to keep a vehicle over the longer term, there is a clear advantage to buy rather than lease. The same advantage normally applies to high mileage drivers.

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