Choosing a new (or new-to-you) car is exciting, and one of the biggest financial decisions you’ll make. You may be wondering, “Should I lease or buy a car?” As such, you should consider all your options and how they’ll affect your lifestyle. What’s the most cost-effective way to drive the car you want? Choosing between leasing or buying a car can be confusing. This post will point out some of the differences and help you make the best decision.
(Also read: Factors to Consider Before Spending Company Funds )
How to answer the question, “Should I lease or buy a car?”
This chart lists the major factors when considering how to finance your car. You can see how leasing and buying treats each factor as you read down the list, which can be either a pro or a con depending on the situation.
Whether you buy or lease a car, it really comes down to a person’s lifestyle and preferences. Leasing is perfect for the person whose priority is to have the latest model and not paying off the entire vehicle. On the other hand, a family probably wants a car they can drive an unlimited number of miles and not need to worry about usage fees that come with a leased car. Here are some scenarios in which leasing or buying would be a better fit.
Allstate insurance has a great calculator for helping you run the numbers. Click here to access it.
The Ideal Leaser
Meet Scott. He is a young professional looking to make his way to the perfect career. He often transports clients for work so he needs something high quality. But, being young, he doesn’t have the cash or the credit history to get financed for the car he needs. He doesn’t drive a lot of miles and he gets paid well so the insurance and mileage fees aren’t a problem.
As Scott gets older and could afford to buy a car, he may decide that he enjoys driving the latest model of vehicle. He knows that a brand new car loses substantial value when he drives it off the lot and requires a higher monthly payment.
He will continue to lease.
The Ideal Buyer
Meet Kinsey. She is a working mom who needs a vehicle that will meet her work and family needs. She can afford a slightly higher monthly payment but eventually will want freedom from it. This works because she wants to keep the family car for a long time. It will be subject to road trips, sports teams, and art projects so she doesn’t want to worry about keeping it in mint condition. Her ideal vehicle is probably pre-owned and she will resell or trade it in for something newer when the kids are older.
(Similar to: Creating a Budget : 3 Helpful Guidelines to Get You Started )
Do you identify more with the lease or buy scenario? If you’re still struggling with the decision about your next vehicle, highlight the boxes in the chart above that you view as advantages and see which column wins out. Just remember that there is no wrong answer. It’s only a matter of preference and what fits you best.
What’s been your experience in buying or leasing a car? What makes you choose one over the other? So how would you answer this question now; “Should I lease or buy a car?”
By Leslie Baker
CPA, Accountant at WHH
