What are the pros and cons of leasing or buying a car?


Quick Answer

Leasing a car is a great way to drive a new car every few years, and it usually requires less money up front and may offer smaller payments. However, mileage and wear and tear charges can add up, and a leased car must be returned to the dealership.

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What are the pros and cons of leasing or buying a car?
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Full Answer

The financial advantages of each path depend heavily on the fluctuation of interest rates. When rates are high, borrowing the money to buy a car outright may be much more expensive than making lease payments. When rates fall, however, the cost may approach parity, making it more advantageous to buy a vehicle rather than lease one. Even with depreciation, coming out of the deal with a tangible asset can be an advantage.

One of the chief pitfalls of leasing is the potential costs at the end of the lease. Lease arrangements are set based on expected driving habits, and if circumstances change, a driver may put substantially more miles on a leased vehicle than expected. This can result in a massive penalty payment at the end of the lease. In addition, wear and tear charges can be expensive, especially if the car is not maintained properly.

Repair costs can also be a consideration. Car owners must cover their own repair bills, while leased vehicles often come with service contracts to cover routine maintenance and mechanical failures.

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