The difference between buying and leasing a vehicle is about the same as the difference between buying a home versus renting one. When you buy a vehicle with a combination of down payment, trade-in, and auto loan, you become the owner. And paying auto loan payments is a lot like paying the mortgage on your home.
If you lease your vehicle, the dealership retains ownership. The payments you make are against the depreciation of the vehicle, and those payments are much like paying rent on a house. You might be the one driving the leased car, but you're not the owner. The question remains: should you buy or lease? This article will weigh the two sides.
Trade-Ins and Tech
Buying a leased vehicle almost always means you're driving one of the latest model years. That's because, at any point, you can go to the dealership, pay final fees, and then drive away with a brand-new car and a new lease. With leasing, you skip the sales tax, keep the car under manufacturer's warranty, and get the latest tech and upgrades. Some people love having the latest model almost as much as they love owning the latest iPhone. Leasing a car keeps that tech current year in and year out.
Leasing a car almost always means a lower down payment. Some leases don't require any money down at all. That's because instead of taking financial responsibility for the entire car, you're only taking responsibility for the car's depreciation during the time of the lease. If you're hard on the vehicle, you might have to pay extra wear-and-tear fees when it's time to trade-in. Unlike houses, vehicles aren't great investments anyway, so this way you can keep more of your money in your pocket.
On the other hand, a leased car payment never goes away. At least with an auto loan (or paying cash up front), once the vehicle is paid for, it's all yours. If you buy, you can also sell it whenever you want. You're responsible to no one.
Financing vs Leasing
Of the two, financing is easier to qualify for. Leasing usually requires great credit scores since the dealership is entering into a partnership with you that involves more risk for them. If you have bad credit or no credit, leasing may not even be an option or you might have to put down a bigger down payment. All that hassle goes away with buying a vehicle because plenty of dealerships are willing to work with a less-than-stellar credit score.
Another thing to consider is how a lease can never be transferred and is seldom renegotiated. Once you enter a partnership with the dealership, you have to agree to the terms or pay sometimes costly penalties and fees. However, when you buy a car, you can refinance your auto loan whenever you find a financial institution willing to give you a better interest rate.
If you like the freedom and flexibility of driving a new car with the latest tech and the lowest down payment, leasing might be a good option. But buying a car will save you money in the long run, especially when it comes time to use your car as trade-in. There are also no restrictions on use or miles to count when you own your vehicle. Because it's yours and you answer to no one but yourself.