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Lease, New or Used: The Smart Way to Approach Car Buying

Lease, New or Used: The Smart Way to Approach Car Buying

Money Management
SouthEast Bank| October 19, 2020
Lease, New or Used: The Smart Way to Approach Car Buying

Lease, New or Used: The Smart Way to Approach Car Buying

By Ben Luthi

Ben Luthi has been a freelance writer since 2013, covering all things money and travel. His work has appeared in many major publications and financial websites, including U.S. News & World Report, The New York Times, Fox Business, Experian, FICO and more. Ben lives in Utah with his two kids, and loves spending his free time traveling, hiking and talking about credit cards.

When it comes time to replace your vehicle, you may be wondering which path you should take: buying a new car, buying a used car or leasing a vehicle? The right answer for you depends on your situation and preferences, so it’s important to understand how each option works and the benefits and drawbacks that come with them. 

Before you get your next car, here’s what to think about:

Leasing a Car

Leasing vs. buying a vehicle is similar to renting vs. buying a home. Instead of financing a car through a lender or paying for it outright with cash, you make payments for a set period — that can be anywhere between 12 and 60 months, depending on the leasing company and your agreement. 

Once your lease is up, you’ll have a few different options from which you can choose:

Leasing can be an excellent choice for people who always want to be driving a new car without the higher costs associated with buying. But if you don’t want to deal with the limitations of a lease agreement or the loss of ownership, it might not be a good fit.

Benefits of Leasing

Leasing isn’t for everyone, but there are some perks that can make it a more appealing option than buying:

Drawbacks of Leasing

Although there are some clear advantages of leasing over buying, there are also some potential pitfalls that can sour the experience for you:

Buying a New Car

Buying is more expensive than leasing, at least on a monthly payment basis. But over time, it could save you money, especially if you plan to keep your new car for a long time. New cars are generally the latest model year vehicles that haven’t been owned before. 

If you don’t have enough money to make the purchase in cash, you’ll need to get an auto loan, either directly from a lender you work with on your own, or through dealer-arranged financing. 

Buying a new car can be a great option for people who can afford it, but higher sales prices and depreciation may be a major obstacle for some.

Benefits of Buying New

Drawbacks of Buying New

Buying a Used Car

Even buying a used car can be more expensive than leasing a new one, but you’ll still get the benefits of ownership. Used vehicles aren’t all created equal, and the older the car, the more challenging it will be to find one at a good price that’s also in the right condition. 

As with buying a new car, you may need to finance some or all of your purchase if you don’t have enough cash. You can do this through the dealer or work directly with a lender. 

Buying used may be the best option for people who are on a budget or who don’t want to deal with the potential cons of leasing or buying a new car.

Benefits of Buying Used

Drawbacks of Buying Used

Which Option Is Right for You?

There’s no one-size-fits-all answer to how you should buy or lease your next car. As a result, it’s critical that you take the time to consider your preferences and your situation to determine the right fit.

For example, if you’re on a tight budget, an older used car may be your best option. If you have more room in your budget and you like the benefits of leasing, it may be worth considering that path, at least for a few years. Just be sure to read through the full lease agreement to understand what you’re getting yourself into.

Finally, if your budget isn’t an issue and you prefer ownership and the new-car experience, buying new may be the best option for you.

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