Should You Lease or Buy a Car? Ask Yourself These 3 Questions to Find Out
- It doesn't always make sense to buy a car when you have the option to lease one instead.
- Leasing a car could end up costing you more money if you aren't careful.
It's a tough call.
Many of us need a car to get to work and just plain function. But that doesn't mean you have to go out and purchase a car. Instead, you may decide that leasing a car makes more sense.
But what if you're on the fence? There are benefits and drawbacks to both owning a car and leasing one. And either way, you'll need to bear the cost of auto insurance. But if you're not sure what path to take, here are three questions that might lead you to an answer.
1. How much do I drive each year?
When you lease a car, you're generally limited to a certain amount of mileage each year. And going over that mileage allotment could result in added costs to you -- costs that make leasing prohibitively expensive.
Most car leases max out at 12,000 miles a year. You can find leases that allow for more mileage, but you'll usually pay a premium for them.
To see if leasing is a viable option for you, you'll need to determine how much mileage you put on your vehicle each year. If you drive 60 miles a day to work five days a week, that's 300 miles a week, or roughly 15,000 miles a year, assuming you work 50 weeks a year. In that scenario, a lease probably won't make financial sense. But if your daily commute is only 20 miles roundtrip, that changes those numbers.
That said, don't just take daily driving into account. Also consider your travel plans. Do you tend to take a lot of road trips? That could result in you going over your lease, so that's something to keep in mind when making your decision.
2. Will surprise car repairs wreck my budget (and do I want to deal with them)?
When you lease a car, you have to maintain it. But you're generally off the hook when it comes to repairs resulting from wear and tear. Or, to put it another way, you generally won't have to replace your car's transmission or face a comparably expensive repair when you lease a vehicle.
On the other hand, when you own a car, you could end up with surprise repairs once your vehicle is out of warranty (which often happens after three years or 36,000 miles). So when making your decision, you'll need to think about your tolerance for repair bills. If you want the reassurance that you won't have to deal with repairs, then leasing may be the better way to go.
3. How important is it for me to have a newer car?
The upside of leasing a car is effectively getting a new vehicle every three years (or whenever your lease runs out, but three years is a common lease term). If you don't care so much about having a new car, then you may decide that buying a used one makes more sense. But if you don’t drive a lot and get enjoyment out of a new car, then you may decide a lease is something worth splurging on.
Ultimately, leasing is right for some people and not right for others. Consider your own circumstances carefully to see if it pays to own a car versus lease one.
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