Determining whether you should buy or lease a luxury car is an important decision. Make the wrong choice and you could end up in a commitment that you don’t want. Or perhaps even lose thousands of dollars in the long run. Depending on your specific situation, sometimes it is better to buy and other times it is better to lease your next ride.
Here’s what you need to think about.
How Long Are You Here For?
If you don’t plan on staying where you are for more than a few years or if you’re planning to move somewhere where you either can’t take the car or don’t need it, leasing may be the better option.
According to Car and Driver, “New luxury vehicles with all their bells and whistles are a blast. Active suspensions work, wafting in silence is soothing, and those turbos mean big power. But they don’t age well, and they pass out of fashion quickly. So, if you want one, lease it for a few years while it’s under warranty. Get it out of your system. Ask your smartest accountant to figure a way for the lease to be tax deductible.”
When you buy or lease a new vehicle, it’s under warranty. This means if anything happens to the car mechanically, it’s covered. However, with a lease, what you pay monthly is fixed and you know when you need to give the car back, and it’s generally within that warranty period. With purchased cars, once you go past the warranty you’ll be on your own for finding a mechanic.
Of course, you’ll still need regular insurance, and you’ll want gap insurance in case the car is stolen or is totaled, but it’s relatively cheap compared to what you’d have to pay without it.
Upside of Buying
The biggest upside is owning the car because you can do whatever you want with it. If you drive a lot, you don’t need to worry about mileage limitations that you face with a lease (and paying overage fees if you drive more than your allotted miles). Likewise, if you have a job or hobby that might wear down a car — basic cosmetic damages you’d have to pay for when you return a lease — then owning is also a plus. But, if we’re talking about a luxury car, then this might not be a factor.
You can usually get a good auto loan through a bank or credit union that offers a better interest rate than the auto company’s financing. And, once you own the car and pay it off, you won’t have any car payments left.
However, if you’re the kind of person who likes to get the latest and greatest model, then leasing is usually preferable.
Upside of Leasing
When you lease a car, you don’t own the car, which can be an upside. According to US News and World Report, here are the perks that come with leasing:
- Lower monthly payments than a loan on the same vehicle.
- The latest technology with a new car every few years.
- Your car will always have warranty coverage.
- Trading-in a leased vehicle is easy.
- You may save some money on sales tax.
- You could have a lower down payment.
On the other hand, leasing does have several negatives:
- You don’t own the vehicle.
- You always have a car payment.
- There’s a mileage limit.
- You can’t customize your ride.
- You won’t get any cash when you trade-in.
- There can be surprising lease-end costs.
- There are restrictions on how you can use your vehicle.
- It can be hard to get a lease with bad credit.
- You need gap insurance.
- Leasing can be complicated.
- Lease deals are limited.
- You can’t get your vehicle fixed just anywhere.
- You have to return it in great shape.
- A lease is a binding contract.
Evaluate Your Situation
What is your current car situation? What is your current job or income situation? These are things to take into account when deciding whether to lease or buy a car. Compare the items on the pros and cons list for leasing to help you decide what’s best for you.