For many who are in the market for a new car, the question that usually arises is “Should I buy or lease?”

Both have advantages and disadvantages. Let’s take a look at buying vs. leasing a new car.

According to Edmunds.com, a person could lease a vehicle costing just under $25,000 for about $300 a month for three years. To buy the same priced car would cost about $400 a month over five years after a down payment of about $4,100. A three-year old used car valued at about $15,600 would cost about $300 a month to buy.

Advantages of Leasing

  • The major advantage of leasing a new car is a lower monthly payment. Typically, the buyer can lease a more expensive vehicle for a lower monthly rate compared to buying it
  • Since most leases are for three years, the vehicle is under warranty for any needed repairs
  • The car can be bought at a market rate at the end of the lease
  • You can have a new car more often

Leasing Disadvantages

  1. You never own the car
  2. The leasing dealer requires top auto insurance coverage
  3. Leasing is best for those who drive 12,000 miles a year or less
  4. Those driving over the allotted mileage are penalized for each mile over the set limit
  5. You will always pay a high auto excise tax in states that have such a tax

Advantages of Buying

  • You own the car
  • Unlimited mileage – no worries about being charged for driving over the mileage limit
  • Once the vehicle is paid off, the owner is free from monthly payments
  • The vehicle can be sold at any time
  • You can choose what optional auto insurance you want

Buying Disadvantages

  1. The vehicle depreciates in value each year
  2. Once the warranty expires, all repair costs fall on the owner
  3. As the vehicle ages, components wear out requiring costly repairs

Buying a Used Car

  • A used car is by far the less costly way to go. But, a used vehicle can require costly repairs, depending how the previous owner took care of it
  • Edmunds.com points out that interest rates for used cars can be at least three times higher than for a new car

It comes down to the individual’s situation and finances when weighing buying vs. leasing.