Advantages of Buying vs. Leasing a New Vehicle
Written by: Jackson D.
When you go to purchase your new vehicle, there are a lot of decisions to make. Once you figure out what kind of car you want, then you need to decide how to pay for it,
Most people can’t walk into a dealership and pay cash for a new car. For most people, it’s going to be either to finance the car or lease the car. Both ways you have to pay interest on the amount you finance. In a normal world, the interest rate would be at least 3.25%, but with the COVID-19 issue, a lot of the cars you can get for 0%. To make my case, I’m going to use 3.25%
The difference can mean more money in your pocket depending on how you look at it. Here is an example for a 2020 Kia Forte.
Example #1 You purchase the car for $ 18,000 for the car, including tax and other fees
You have $2,000 to pay the dealership and will have to finance $16,000
Purchase Price $18,000
Cash Paid (2,000)
Amount Financed $16,000
Divide by 48 months $333.33 / month base payment
Interest @ 3.25% 42.73
Total Monthly Payment $376.06
When you make all the payments, the car is yours to do what you want
Example #2 You purchase the car for $18,000, including tax and other fees
You have $2,000 to pay the dealership, and the residual is $9,000. You only have to finance $7,000.
Purchase Price $18,000
Cash Paid (2,000)
Residual (9,000)
Amount Financed $7,000
Divide by 48 months $145.83 / month base payment
Interest @ 3.25% $18.96
Total Monthly Payment $164.79
When you make all of your payments, the balance due is $9,000. At this point, you can pay the $9,000. You can trade the car in for another car, or you can walk away.
Leasing is good for people that want a new car all the time because you only pay for how much you use it. If you keep cars until they die, then financing is a better plan. If you're starting out and don’t have a lot of money to work with or not wanting a bank loan than leasing a car would be the way to go but if you are willing to take a loan out and know that you're gonna have that car for a long period of time and want value in the car then buying it may be the route to go on.
Works Cited
Consumer Reports. “Leasing vs. Buying a New Car.” Consumer Reports, www.consumerreports.org/buying-a-car/leasing-vs-buying-a-new-car/.
“Leasing vs. Buying A Car - Breaking Down The Numbers.” Your Easiest Way to Lease, www.carlease.com/posts/2017/leasing-vs-buying-a-car-breaking-down-the-numbers.
Watson, Charlie. “Is Leasing A Car A Glorified Rental?” Cinci Auto News, 13 Dec. 2017, cinci-auto-news.com/2017/12/12/is-leasing-a-car-a-glorified-rental/.
My parents have never leased a car. But my neighbors did. I always saw them get a new car every now and then and thought it would be cool to always switch. But then as I got older I realized that it would be more practical to buy because after the payments are done the car is still worth value and you can get money off another car. When I get older I can see myself buying a car, and then trading that one in for a new car after I am done with my payments.
ReplyDeletePersonally I think I will buy a car. For me it isn't even so much about having a car for the long run and using it until it dies like you said, personally I would just want to own my own car and get to decide what I'm going to do with it. When you lease a car you can only put a certain amount of miles on the car in the given year. By having your own car you can hold on to it and drive it as much as you want and eventually once the car is paid off, car payments is just one less thing that you have to deal with.
ReplyDeleteGrowing up my parents always warned me to never lease a car due to the dangers of falling into severe debt, but based on this reading I’ve come to the conclusion that it really isn’t as long as you stay on top of your lease. Personally I still believe that purchasing a car is better for the long run, but I wouldn’t speak against leasing if you don’t see yourself sticking with the same vehicle for years to come.
ReplyDeletenice job. i like how you explained the differences in both of them and how it do it. when i bought my truck i bought.
ReplyDeleteI would not go with leasing because you are wasting money plus you can only go a certain amount of mile a month which you are not using the car to its full price. With buying the car, you are not restricted to the amount of miles you are going and it would be cheaper in the long run. You also did a good job on the post.
ReplyDeleteI really like the examples you gave, it helped visualize the difference between buying a car and leasing a car.
ReplyDeleteThis is extremely useful to me as I will likely be buying a car in the future, and will keep in mind how much I plan to use the car before I make the decision as I might only need a car for a couple of year to which I will lease or if I am buying a car I intend to drive for a long time then I will finance/buy the car
ReplyDeleteThis is a Great post. I agree with all of it.
ReplyDeleteAfter reading this post, I would say I would just purchase a vehicle. This was a very useful post. Good Job!
ReplyDeleteAfter reading this buying a car seems like the best option for me. Depending on someones lifestyle, wants, and needs the best option might be different. To some people leasing a car and having a new car all the time might be nice, but in reality you wouldn't be able to take it on a long road trip, you'd have to pay for damages, and really anything that puts the car at a lower price. For me personally I would buy a car.
ReplyDeleteThanks for sharing! If we simplify this down, it seems like leasing is a way for people to pay a premium for driving new cars, while providing an opportunity for others to purchase used cars at a cheaper price. While this may not have been the intent, it is a cool and useful economy that has been set up, and it provides a lot of choices for people to make when purchasing cars.
ReplyDeletePurchasing seems quite a bit more cost effective than leasing.
ReplyDeletethats crazy that if You purchase the car for $ 18,000 for the car, including tax and other fees
ReplyDeleteYou have $2,000 to pay the dealership and will have to finance $16,000! wow
Would it be easier if you just paid the full 18,000 in case you had the money and didn't need to have a loan for it? This cancels the interest cost and makes it more sensible than wasting your money on the interest and this would then allow you to sell the car instead of when you lease it and you no longer have the right to sell the car and get that money back.
ReplyDeleteWhat does residual mean? Also personally I feel like leasing would be the money smart thing to do. I have purchased a car in my possession right now but in the future I should probably lease. It just makes more sense for me. You also could have added that any maintenance that needs to be done will be taken care of if you lease. I feel as though that is a nice weighing factor when deciding what to do.
ReplyDeleteI plan to have multiple vehicles when I'm older and this information will be stored in my brain until that time. Leasing the car is a good plan and I may do that once or twice, but for the most part I would rather have a lesser chance of debt and just finance the car instead. Money speaking, financing would be better than leasing for me as I would be driving the car until the wheels are almost about to fall off, at which point I'd sell it to some kid looking for a car.
ReplyDeleteI agree for the most part. I can understand why most people would want to purchase a car rather than leasing one, due to the fact that there are additional restrictions when leasing a car. For example, you mention the amount of miles you are able to put on the car. I think not having to worry about added miles, would make the car buying process much less stressful.
ReplyDeleteTo begin, I admired how you incorporated examples and the way COVID-19 has affected the interest rate. Your blog confirmed that buying a car would be the preferable option.
ReplyDeletepersonally for my truck I bought y vehicle because it was used and i was going to use it till it died on me and now realizing if I leased a car I would still be paying the same price for a new car but have to give it back after the lease is up, it just sounds outrageous.
ReplyDeleteI really liked your blog post, and as someone who is planning on getting a new vehicle before college, buying verus leasing was something that I needed to debate. This post was very informational and allowed me to gain insight on what both opinions mean and how it would change depending on the price of the car you are going to buy and all these other factors (year of car, its make, mileage, condition, etc). This blog would really be helpful to any age group that is thinking about a new vehicle and wants to learn more!
ReplyDeleteLeasing a car is more expensive because you can go only a certain amount of miles and you have to pay the dealer ship monthly before giving the car back, you are basically paying for the miles. If you are buying a car, you can go as far as you want with a car that you bought and you don't have to give the car back.
ReplyDeleteLeasing a car can be the best options in some cases, especially if you want to have a newer ride all of the time. Leasing a car allows you to be more financially put by doing small payments every month instead of breaking the bank all at once. Also dealerships will give you a limit for miles, so leasing might be a good option if you don't drive everywhere all day.
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ReplyDeleteLeasing a car is more expensive if you plan on going for road trips, I know my family does that almost every year, and having a car in your possession means you don't need to worry about the miles on the car. It would also be more cost efficient to have to pay for repairs on your car rather than leasing a new one every time the cycle of another car runs out.
ReplyDeleteShowing both sides of the car buying options really opened my eyes because I always thought that buying a car would have been more expensive monthly but after reading your post I can now see that it is not. My parents have always leased cars so they could trade it in for the new one after a couple years, but now that I see it is cheaper monthly to just buy the car I might just take the loan out and go that route when I am looking to buy my own car.
ReplyDeleteI had never really understood the idea of leasing a car because personally my family has switched from financing multiple different cars over the past few years. I understand now why we chose to do that; we needed additional cars in our household to get to work and back or because more members of the family received driver's licenses. As a result, paying a low up-front cost for a relatively "cheap" car and paying the monthly installments with interest compounded the car's value, and so when we sold it, we made a lot of residual income which we used to pay off the lease for the entire car and even some of the leftover money to purchase a new and better car for our family. This process then continued until we purchased a brand new car that was suitable for our family members and accomodated our needs.
ReplyDeleteIt was great that you explained both sides perfectly. For many people, leasing the vehicle may be the better option, but for others who want to use their car until it's final days, then purchasing the vehicle is a better option. Agreeably, purchasing a vehicle, like my family has done for me, was the best option due to it being my first car, therefore, we do not have to worry about leasing a vehicle that could potentially be involved in a collision as the car would not be worth the extra money. Thanks for the extra information.
ReplyDeleteThis was a very good blog post because you helped me understood more about buying and leasing a car. This information can really help a lot of people when they are buying a car. I will hopefully be remembering this information because it can be very helpful to me when I'm older when I own a couple of cars. I really loved how you put the examples on there because it made it so much easier to learn about leasing and buying a car. I will be leasing my cars when I am older because it is cheaper and it seems much easier doing
ReplyDeleteI think that buying a vehicle would be easier. Especially since then I wouldn't have to give my car back at the end of the payments and pay more each payment. This would also result in me being able to hold more value towards my car whether I wanted to trade it in or keep it.
ReplyDeleteI agree that leasing and purchasing cars have their own benefits and disadvantages on any given situation, however I would have to disagree that leasing is the better option if you want a new car. New cars will be more expensive, but you can decide to pay it off little by little each month as you said earlier. You don't have to pay all of it up front, and it will save you money in the long run. When paying off your car, you only have to pay your monthly bill for as long as you own it. So say you only own the car for 3 years before it starts to have too many maintenance problems, you can stop paying and trade it in. If you pay all the money up front the car is yours from the start, but you may not get what you paid for when and if it starts to deteriorate.
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