Though some cities have great transportation systems, in most places you need a car to get around. However, buying a car isn't your only option -- you can also lease, which offers several advantages over buying. But, leasing also has its drawbacks, including the fact that you're never going to own the car for yourself.
Lower Up-front Costs
When you lease, you can get away with paying a lot less up front than if you wanted to buy the car. Not only do you not have to pay various fees that are required when buying, your monthly payment will also be lower than buying -- up to 30 percent, according CBS News. So, if you're short on cash, leasing offers a way to get your foot in the door of a new car. And, since the lease is up after a few years, you can get your foot in the door of another new car after that.
The lease term typically coincides with the manufacturer's warranty, which means your car is covered the entire time you're using it if you're leasing. When you buy a car, you're stuck paying out of pocket for the repairs once the warranty runs out. In addition, when your lease is up, you just return the car to the dealer and you're done. If you own the car, you go through the hassle of finding a buyer and haggling on price to resell it.
Higher Overall Cost
Though the up-front costs and monthly leasing costs are lower for a while, in the long-term, buying is often less expensive, according to CBS News. Why? When you're leasing, you're not building any equity in the car, so you're always going to have a monthly lease payment. When the lease is up, you start over with a new lease. If you buy, once you've paid off your car loan, your monthly payment drops to zero for as long as you own the car. In addition, the cost of leasing also goes up drastically if you terminate the lease early.
Leasing a car may cramp your style: since you don't own the car, you're likely very limited as to what modifications you can make to it. Plus, if you do make some improvements, they stay with the car when you have to turn it back in at the end of the lease. In addition, your lease likely contains restrictions on how many miles you can drive the car before additional charges kick in. According to CBS News, the limits are typically between 12,000 and 15,000 per year.
- CBS News: The Pros and Cons of Leasing a Car
- CBS News: Why You Should Lease a Car Now
- Bankrate.com: Pros and Cons of Leasing
- Kiplinger. "Five Myths About Leasing a Car." Accessed Aug. 15, 2020.
- Nolo. "Car Leasing: Maintenance, Repairs, and More." Accessed Aug. 15, 2020.
- Internal Revenue Service. "Publication 463 (2019), Travel Gift, and Car Expenses." Accessed Aug. 15, 2020.
- Edmunds. "Looking to lease? Read our car leasing basics." Accessed Aug. 15, 2020.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."