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Buy Versus Lease Cars, the Pros and Cons

Written By Sabah Karimi

Making the decision to buy or lease a car can take some time, and there are benefits and drawbacks of each option to consider. While leasing a car can give you a brand new set of wheels from the showroom, you will never actually own the car you're paying for without making payments for the entire lease term. Buying a car gives you the option to sell it any time you choose, and keep it as an asset; still, you'll be responsible for all mechanical work and repairs.

If you're considering a new car purchase, consider these pros and cons of each decision:

Benefits of Buying a Car

Buying a car with cash or a loan means you are free of the responsibility of monthly payments and can sell the car any time you choose. Buying also gives you the advantage of purchasing a used vehicle; you might be able to find a great price for a slightly used vehicle that has a high resale value, and this won't necessarily depreciate as quickly as a brand new car off the lot.

Key benefits of buying a car include:

-Your choice of car insurance - no limitations on what type of coverage you have to have so total insurance costs can be lower than average
-Keeping the car at the end of your loan payment
-Reliable transportation that you control and own

Drawbacks of Buying a Car

While buying a car offers several benefits, there are some drawbacks of making the purchase such as:

-Potentially high maintenance and repair costs - these are wholly your responsibility because you won't have warranty or repair services at your disposal
-Having to pay a high sum in one go (unless you're getting a loan)
-Loan interest payments (unless you're paying cash upfront)

Benefits of Leasing a Car

Leasing offers some flexibility in having a vehicle because you won't have to pay a large sum upfront. When you're leasing a car from a dealership, you may also be able to get the car of your dreams - one that you probably couldn't afford to pay cash for on your own.

Other benefits of leasing a car include:

-Ability to trade in the car for something else each year
-Warranty and repairs taken care of - the dealership will manage all repairs and maintenance to keep the car in great shape
-Driving a car that you couldn't afford to purchase through a bank loan or cash

Drawbacks of Leasing a Car

If you look at leasing a car as 'renting,' you'll quickly understand the drawbacks of this type of purchase. Leasing a car means you are simply paying to use the car each month; while you may have a new set of wheels at your disposal, your money is going towards using that car and not necessarily owning it.

The drawbacks of leasing a car include:

-Paying for depreciation - this is typically rolled into your lease payment and is an added 'cost'
-The contract - you have to commit to payments for the life of the contract which can be detrimental to your finances if you can't keep up with the monthly payments
-Higher insurance costs - you'll need to get premium insurance coverage which may be more costly than a car you might own
-Mileage restrictions - you may be limited on how many kilometers you can rack up on the car each year and pay a premium for anything that goes over your allotted mileage

Making the decision to buy or lease a car will depend on several factors such as your monthly budget, your short and long-term goals for owning a car, and whether you want to build equity in a vehicle or own it upfront. If you're entering a leasing agreement, you'll want to make sure you've read all the details and fully understand the terms of the contract; if you're buying a new or used car with cash, making sure the car is in good shape can prevent excess costs in maintenance and repairs. Consider all of these benefits and drawbacks when making your car buying decision so you make the best choice for your new vehicle.

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