Leasing vs. buying a car | What you need to know | Roost
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Leasing vs. buying a car: What to know

Leasing vs. buying a car, which way should you turn? There’re a ton of things to consider and to ask yourself before taking action: How much of a car payment can I afford? Can I consistently cover maintenance costs? And of course, the really important stuff like whether you love the bling bling of a new car every few years or if you tend to get emotionally attached, name your car Betty, and treat her like she’s your best friend. Read on for help answering these kinds of questions and trying to decide whether to least or buy a car.

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Leasing vs. buying a car: What’s the difference?

When you lease a car, you are essentially borrowing it for an agreed-on amount of time—typically 36 or 48 months.  Leasing often means slightly lower monthly car payments, less out-of-pocket cash, and the peace of mind of knowing that the car maintenance and warranty is covered through the lease agreement.

There are usually restrictions, such as how many miles you can put on the vehicle and fees for going over mileage. Once the lease is up you can choose to return the car, renew the lease or get a lease on a different vehicle.

When you buy a car, you have complete control over it. You can trade it or sell it whenever you choose. There are also no restrictions on how many miles you drive it or what types of modifications you can make. You can also trade it in or sell it at any time.

With all that freedom comes the responsibility of paying for maintenance, higher car payments, dealing with the sometimes confusing purchase and selling process, and more.

Leasing vs. buying a car: the pros and cons

The pros of leasing a car

  • Lower monthly payments: In general, monthly leases are less than a car payment. However, the newer the car and the shorter the lease, the more your monthly payments are likely to be.
  • No maintenance costs: Many people love this part of leasing—no out-of-pocket maintenance. Newer cars also come with 2-3 year warranties which covers most repairs as well.
  • Carefree car resales: Aka: you don’t have to resell it at all!  Cars famously depreciate very quickly, by as much as 10-20%, as soon as you drive it off the lot. If you’re leasing it, it is not your problem.
  • Get a new car every 2-3 years: That’s right! Whether it’s a status thing, an ADHA issue with cleanliness, or just a harmless addiction to that new car smell—many people are attracted to leasing because every 2-3 years they get that brand new car, with the latest technology and happy sense of clean.
  • Possible business tax deductions: If you’re a business owner, you’ll find that tax deductions are more favorable for lease payments over car loans.

The cons of leasing a car

  • No ownership: From mileage restrictions to personal modifications, you don’t own it, so you can’t make any adjustments or customizations unless you want to pay some steep fees for unauthorized changes.
  • Never-ending monthly car payments: All the pros above are great, but you’ll also never get rid of that monthly payment, which means you’ll never pay it off and you’ll never free up that money for something else.
  • No control: You can’t trade it in or sell it to help bring down the price of your next car purchase, and you have to keep the car for the length of your lease.
  • Fees and added costs built into lease: As mentioned above, leases have fees built into them such as excess mileage fee, modification fees, excess wear and tear, early termination fees, etc. You may experience this type of cost when you go to resell a car of you own, but it feels more tangible when it’s a line item expense in the final bill when you return the car to the leasing office.

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The pros of buying a car

  • Total control: It’s all yours, baby! Drive it as far as you want, trade it or sell it whenever you want.
  • No lease restrictions: Whether you want to upgrade the speaker system or slap a bumper sticker on it, it’s your car to do with what you want.
  • Car loans: 2 great things about car loans… 
    • 1) You can eventually pay them off, and that means you’ve just freed up money in your budget, sometimes as much as $748 a month. 
    • 2) Car loans are considered ‘good debt’ compared to credit card debt, which means it’s helping your credit score, as long as you are making those payments on time.
  • Credit score: Speaking of credit scores, yours does not have to be as good to be approved for a car loan as it does for leasing. So if your score is on the bleak side, securing a car loan could, in the long run, help raise your credit score with good payment history. 
Roost Tip! On the flip side, if your credit score is really bad you’ll want to be wary of high interest rates that can end up costing you a ton of money not to mention take many years to pay it off.
  • Life-time costs of an owned car are typically less than leasing one: Although there may be some upfront savings with leasing, if you’re a long-term planner and you do the math, long-term costs are generally less overall when you own your own car.
  • Tax deductions: This is a pro whether you lease or own, if you’re driving your car for business you can write off miles on tax returns.
Roost Tip! Tax side note, most people don’t know that they can also write off any miles driven for medical appointments. Whether you lease or own this can save you some money on tax day!

The cons of buying a car

  • Maintenance costs: If there’s one thing renters can appreciate, it’s not having to deal with unanticipated maintenance costs. When you own your car, it’s all on you. Anticipating potential expenses can be a good stepping stone between renting and owning a home, but it can also be a real drag on your current finances if you haven’t planned ahead.
  • Rapid depreciation: Once you drive the car off the lot, and for most cars, your resale value drops dramatically and just keeps dropping until the day you sell it.

Roost tip: You’ll never sell the car for more than what you bought it for, but to sell it at a top Blue Book value, document all regular maintenance, take care of the paint, protect the interior, and park it in a garage or under a carport to protect your vehicle from the elements (and people :).

  • Negotiating the sales process: Everyone has heard the horror stories of the car salesman. Negotiating your way through a car sale process can be confusing and you need to make sure you’re not getting taken advantage of.
  • Getting approved for a loan with good terms: This goes back to what we mentioned earlier about your credit score and how it can affect, for better or worse, so many financial happenings in your life. If your credit score isn’t great, it may end up costing you a lot of money in interest.

Car leasing with insurance: Do I need it?

Yes. Whether you lease or own a car you must have car insurance to legally drive it.

The terms of most car leases will require that you carry comprehensive car insurance.  Comprehensive covers more than just car liability insurance (which pays for damage or medical bills you caused to another driver) by paying for things such as damage done to a car by a storm, or a tree falling on it, etc. 

What is gap insurance and do you need it?

Gap insurance is insurance that protects you by paying off the balance of your loan or lease agreement in case your car is totalled.  Why? If you total your car, you’ll likely still be responsible for paying it off (lease or loan) despite the fact that the car is completely undrivable.

As much as we hate paying for yet another type of insurance, if you bought a new car or just entered a new car lease, gap insurance could save you from financial catastrophe if the worst happens.

How to use a car insurance calculator

Using a car insurance calculator is easy! Most, like Insurify, just need you to input your zip code, then answer any questions that help them understand you and your driving habits better. Try this one out, it’s free and takes less than a few minutes to get the best rates you can find in your area.

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A quick note! Our goal is to gather and share info that’s up-to-date and helps you make great decisions as a renter. That said, the information you get directly from a provider could be a little different. Make sure to review their terms and conditions directly; and, if you see anything here that needs to be updated, please let us know! Advertising disclosure
Last Updated: January 3rd, 2023