Advice Center

Leasing vs Buying a Car: How to Choose the Best Auto Financing Option

Deciding between leasing and buying a car can be like choosing between two equally delicious desserts. Both have perks, but one might suit your taste better depending on your preferences and lifestyle. Let’s break down the differences and help you figure out which financing option is best for you.

Key Differences Between Leasing and Buying a Vehicle
When leasing a car, you rent it for two to four years. You make monthly payments during your lease term and return the vehicle when the lease ends.

Buying a car means paying cash or taking out an auto loan to cover the car’s purchase price. Once you pay off the loan, you fully own the vehicle.

Benefits and Downsides of Buying a Car
Buying a car has some clear financial advantages and disadvantages. Several benefits to consider include:

• • You build equity as you pay down the loan – the car becomes a valuable asset you own
  • No mileage restrictions – drive as much as you want with no overage fees
  • You can customize, modify, or sell the vehicle later

Potential downsides of buying include:

• • Higher monthly payments
  • Responsibility for repair costs after warranties expire
  • Risk of an “underwater” loan if the car depreciates faster than your loan balance

When is Leasing the More Affordable Option?
When leasing a car, there are several benefits and downsides to consider. Some of the advantages include:

• • Lower monthly payments
  • Constantly driving a newer car with modern features
  • Warranty coverage for most maintenance
  • No resale hassle when your lease ends

The cons of leasing involve:

• • No ownership stake or equity in the vehicle
  • Strict mileage limits lead to fees if exceeded
  • Wear and tear charges when turning in the car
  • Making perpetual monthly car payments

Calculate Total Costs Before Deciding
Run the numbers for both buying and leasing to see which costs less. Check out some of these factors:

• • Down payment amount
  • Monthly payments
  • Expected mileage and wear and tear fees
  • Total interest paid over the loan or lease term

The best auto financing option depends on your budget, driving needs, and personal preferences. Get personalized advice from our financial representatives at Energy One Federal Credit Union to weigh the pros and cons and make the optimal decision.