Having a car is a commitment. If you’re in the market for a new ride, you may be facing some tough decisions. For instance, will your next car be something you buy or lease?

Depending on your lifestyle, where you live, and personal preferences, the decision to lease or buy can be challenging. After all, purchasing and leasing both have their own benefits and shortcomings.

Let’s discuss buying and leasing a car while covering key points to help you make an informed decision.

The Differences Between Buying and Leasing

Before we dive into the pros and cons of each side, let’s briefly go over how buying and leasing a vehicle work.

Buying a car is pretty straightforward. A buyer uses money to pay for a vehicle from a dealership or a private seller. The process may involve negotiating a better price, but the result is the same. Purchasing a vehicle means the buyer intends to own it. In other words, the fully paid vehicle can serve as an asset to fund another significant purchase or be held for as long as possible.

The most common way to own a car is through financing. Many car buyers will go to a financial institution to take out a loan to help pay for the vehicle. This involves putting up a down payment, which is a percentage of the car’s purchase price. Then, a car owner will pay monthly installments over a period of time that include interest.

Once the car loan is paid off, the owner truly “owns” the vehicle. At that point, they only need to cover the cost of insurance, maintenance, repairs, registration, and taxes according to local laws.

In contrast, leasing a car means renting a vehicle over a set period. The lessee enters a lease agreement with the dealership, paying them monthly in exchange for the ability to drive a new car. Lease terms typically last a few years or a set number of miles.

Monthly payments are made over the course of a lease’s term. At the conclusion of the lease, the lessee returns the car to the dealership. At that point, there is an option to buy the vehicle through a lease buyout. If the lessee chooses not to buy, then they will no longer have the car once it’s returned to the dealership.

The Pros and Cons of Buying a Car

Owning a vehicle can be great. On the other hand, it does have its fair share of pitfalls.

Let’s briefly go over some of the standout advantages:

• Owning a car can be a practical asset: After paying off your car loan, you are free to use your vehicle how you see fit. You have the option to continue driving it until it becomes too costly to cover maintenance. Or, you may trade it in for a newer vehicle. If your financial situation requires it, you can also sell your car for cash.
  
• Customization and control: Owning a car means you can exert a great deal of control over it. You have the option to make cosmetic changes and personalize a vehicle you own. Also, you may drive the car for as long as the engine and internal parts allow.
  
• Flexibility: Life happens, and there may be a time when you need to modify your loan agreement. Depending on your credit and the term of your loan, you can refinance later to lower your payments. You may also have the option to sell or trade in the car, and the proceeds can help pay off the loan.
  

Of course, there are also some disadvantages to buying a car:

• You don’t actually own your ride until it’s paid off: When you finance a vehicle, it is used as collateral. That means your lending institution can repossess your vehicle if you can’t fulfill your payment obligations.
  
• High upfront costs: One of the biggest hurdles to securing car financing is meeting the minimum down payment, which is typically 20% of a car’s purchase price. That is a significant amount of money, depending on the make, model, and condition of the vehicle you want.
  
• Cost of maintenance: Owning a vehicle also means being responsible for it. Once the car is out of the manufacturer’s or dealership’s warranty, you’re on the hook for any maintenance or repair costs. The longer you own a vehicle, the more likely it is that repairs will become more expensive.
  

The Pros and Cons of Leasing a Car

If you’re thinking of leasing, there are upsides and downsides to the deal as well.

Let’s cover several advantages first:

• Experience newer vehicles: Leasing almost always means you get to drive a new car. That means you gain access to the latest technology, comfort, and safety features that the industry has to offer. You might even gain a boost of confidence from having access to a sleek and stylish ride.
  
• Comparatively lower costs: Monthly payments on a lease agreement are determined by how much the car is expected to depreciate over the lease term. Compare this to a loan, which is based on the car’s total value at time of sale. As a result, monthly lease payments tend to be lower than a loan payment for a similar, new vehicle.
  
• Eases the burden of ownership: New vehicles are still covered by the manufacturer’s warranty through the term of a lease, and the dealership may throw in other perks like free inspections or oil changes. Plus, when your lease ends, you only need to return the vehicle to the dealership. There’s no need to worry about resale value or trying to negotiate a deal.
  

On the other hand, leasing a car comes with its fair share of disadvantages:

• Mileage restrictions: Many leases put limitations on how many miles you’re allowed to put on the vehicle each year. These mileage caps can be as high as 15,000 miles per year. If you go over your lease’s mileage cap, you’ll be charged per mile after that limit. These extra fees can easily add up if you’re a frequent driver.
  
• Monthly payments each time you lease: You’re making payments throughout the entire lease term. If you lease frequently, that also means those payments continue the more often you swap cars. This can consume a significant portion of your budget over time, especially if your circumstances change.
  
• Repair costs for significant damage: One sneaky cost to leasing involves excessive wear and tear. When you return the vehicle, the dealership will inspect it for damage. If they determine that repairs are needed, they can charge you substantial fees. The dealership defines what counts as damage, so a repair charge may come as a big surprise.
  

To Buy or Lease? The Choice Is Yours

As you can see, buying and leasing a vehicle can be a tough decision. Both options have their ups and downs. To determine which choice is right for you, it helps to identify your priorities and expectations for having a vehicle.

Buying a car might be your speed if:

• You drive often and take lots of trips.
• You’d like an asset that can work toward bigger purchases.
• You want to hold onto a car for as long as possible.
  

Leasing a car might make more sense if:

• You don’t expect to hold onto a car for long.
• You want access to the latest and newest automobiles.
• You need a car, but don’t necessarily have to drive often.
  

Of course, many other factors can influence your decision. Ultimately, the choice will depend on your preferences and what’s most sensible for your budget.

If you’re in the market to buy a car, First Florida helps you take the next steps confidently. Use our loan calculators and auto financing resources to determine if buying is the best option for you.