Confused between leasing a car vs buying? It’s not always clear when the best time to lease a car is. Buying a vehicle can be more expensive up front, but it also has some benefits that leasing doesn’t offer. On the other hand, leasing offers lower monthly payments and flexibility for drivers who might need their vehicles for different purposes at various points in the year.
So, is it better to leave or buy a car? How to decide the best option for your situation? Let’s explore these questions & possibilities in the market.
When should you lease a car vs buying?
A car lease is a contract between you and the leasing company. It lasts for an agreed period of time, typically from two to four years. Leasing a car is just like taking out a loan. You are financing the cost of the vehicle by paying monthly payments to the leasing company.
Here are some things you need:
- How much money you can pay on your lease each month, which is what determines whether or not it’s affordable for you in the first place.
- A driver’s license and proof that you have had one for at least two years (any state’s driving record without any accidents listed)
- Proof of country/state residence such as a utility bill with your name on it if there isn’t an address already printed on your driver’s license
- Proof of employment such as pay stubs if receiving income from another source than work. If you’re unemployed, make sure you have a letter from the government or another organization stating that this is, in fact, true.
All paperwork pertaining to the sale of vehicles are stored by auto dealerships in deal jackets. If you’re looking for various printed, blank, custom, and other deal jackets or other auto dealer supplies.
In general, you want to lease when you don’t know if you’ll need or want a vehicle in the long term. You may also want to lease if you’re not sure what type of car to buy or lease and would like to explore your options first. With leasing, you’re able to change your car more frequently.
Many drivers find themselves wanting a different car every five years or so. If this sounds like you, leasing a car may be a more convenient option. It’s also worth noting that the car market changes every year as new models are released, and old models are discontinued. So, you’ll be able to take advantage of the latest cars without having to pay for depreciation.
Leasing is also significant if you’re looking for more flexibility in mileage or parking because there’s nothing really tied down on paper compared to buying a vehicle outright. This means that changing jobs or moving can happen much more quickly while still keeping your wheels (just make sure the lease contract allows such changes).
You can lease a car for as little as $199 per month with no money down. The monthly payments are determined by your income level. If you’re struggling to make ends meet each month, then leasing will not be the best option for you because it’s more expensive than buying a used vehicle outright-make sure your existing bank account doesn’t charge any fees. Leasing is also less of an immediate commitment since it typically only lasts two years compared to three-year terms on what amounts to “buying” cars outright. It also avoids getting into long-term maintenance and repair.
A lease is just like renting, but typically with fewer options. With a rent-to-own agreement on a used vehicle, for example, you can either purchase the vehicle outright at any time or continue renting, while with leasing, you have to turn it in after two years.
The only instance where we would recommend using a lease is if your credit rating isn’t stellar. For example, suppose a potential customer has a FICO score of 580, and they’re looking for something compact (e.g., Ford Focus). When comparing car payments over 60 months, the person will be paying around $27 more per month by buying than they would by leasing. However, that’s not enough of a difference to offset the higher monthly payments on the lease itself ($340 vs $313).
So, in this instance, it’s better to lease because their credit rating is not excellent. Therefore, they can’t get approved for an auto loan or don’t have enough money saved up to buy outright. However, when one’s credit rating is low (under 580), and they want to buy something, then leasing is the best option because it will save them money.
But if a person has an excellent credit rating (over 700), then they can get approved for a loan or have enough saved up to purchase outright without any additional fees. In this scenario, it would be better for that individual to buy than lease. When one’s credit score is high (greater than 600), we recommend buying outright rather than leasing because there are no extra fees, and their car payments won’t change whether you’re purchasing or renting from the dealership. The only exception will be if they get an offer for a car with zero down payment and is in good condition. It would be better to lease from the dealership because you will have no out-of-pocket expenses when your time limit expires.
Still unsure if you should just buy instead of lease?
If you’re unsure whether leasing or buying is right for your lifestyle, the best way to find out is by talking with someone at the dealership. Explain your situation, and they will help you find the right solution.
If you’re interested in purchasing a vehicle, your interest rates will be lower than if you were leasing because there’s no lease payment financing involved and buying a car outright means that it won’t depreciate as much since you’re paying cash for it upfront. This also makes the decision more permanent.