Both leasing and buying have relatively equal ups and downs. It all comes down to your individual priorities and standard of living. If you like long-term stability and independence, you are probably more inclined to buy. If you think more short-term and enjoy low-commitment, leasing may be for you. It really all depends on your lifestyle.

Leasing

To lease a car is to finance its use. Although technically incorrect, it is easy to think of leasing as “renting” a car. Once the rental period ends, you have the choice of either returning the car or purchasing it.

The fun part about leasing is that you will be able to drive something new every few years. It is a great alternative for anyone that has commitment issues and is constantly itching for the latest models. Other benefits include zero to no down-payment, lower monthly payments, and lower tax payments. You may even avoid maintenance costs when leasing a new car since warranties usually last the lease period (the average lease period is three to four years). All of this means leasing will allow you to drive something you cannot actually afford to buy.

Low payments, new cars – sounds like the perfect situation, right? The disadvantages, however, will become evident over a longer period of time. In the long run, leasing cars will cost you more than purchasing. And despite the freedom of being able to drive new cars as you please, you are actually tied down by a few factors. First, you will always have payments to make. Second, you are restrained by the fixed period of the lease. If you decide you do not want the car anymore and terminate the contract, it will cost you. And if you surpass the predetermined mileage allowance, it will cost you. With charges up to 20 cents per extra mile, this can get ugly pretty fast. Also keep in mind that leased cars face higher insurance costs.

Buying

To buy a car is to finance its purchase. By the end of your loan payments, you will be able to keep it, sell it, drive it from coast to coast – whatever you want. It is your property, after all!

Purchasing a car means that you will one day have no car payments to make. To some, being debt-free offers more freedom than leasing does. In the long run, after using the car for many years, it will be cheaper than leasing. You will even have lower insurance payments than if you had leased.

Alas, buying requires more money, more rapidly. Buying typically demands a high-initial cost in the form of a down-payment and you will be facing higher monthly payments than you would with a lease. Some buyers may at some point owe more in loans than the car is actually worth, which could be a frustrating situation. However, buying for keeps is still cheaper in the long haul.