Should I Buy or Lease a Car?

Your guide to deciding if it’s better to buy or lease at the dealership


Should you buy or lease your car


So, you want a book to read for your weekend getaway. (A cheesy rom com of course!) You have choices: do you float over to the library to borrow it, or do you hop down to the bookstore to buy it? You have to weigh your options: do you want to keep this book forever and be able to annotate and dog-ear the pages? Or do you want to save money and just hold onto it for a week.


Unfortunately, the decision to buy or lease a car isn’t quite the same as whether to buy or borrow a book. A car takes up a tad bit more physical—and financial space.


It’s always nice to have options, but sometimes it can be overwhelming to know which one is right for you and your financial situation. Believe it or not, deciding if you should buy or lease your car doesn’t have to be a stressful decision. Don’t worry, you're not alone! Download Pocketnest, and we’ll be by your side the whole ride!


In the meantime, we’ll help you make your plan to get your new car, whether that’s buying or leasing.



When you should lease a car


So, before you even debate whether to lease or buy a car, here’s a general “what you need to know” about leasing. Typically, a lease lasts 2-4 years, with mileage limitations each year. Over those several years, you’ll make monthly payments on your lease, amounting to a (sizable) portion of the total cost of the vehicle. Different from buying the vehicle, you’re not actually paying for the full price of the vehicle—then again, you’re also not keeping it, so it makes sense, right?


Once your lease is up, you’ll return your car to the dealership, which will turn it around and sell it as a used car.


Then the cycle continues. When you return your car to the dealership, you’re at the same crossroads as before, whether to lease again or buy this time around.



Pros of leasing a car


It’s not a permanent decision


You likely wouldn’t marry a partner if you weren't 100% ready to be committed to them for a long, long time. Instead, you would hang onto the dating stage until you felt ready. Low commitment, still some benefits. Think of leasing like dating and buying a car more like marriage. You don’t need to agree to driving the same car for anytime after your lease ends. It’s a set term, or a set amount of years... If you’re not sure exactly what type of car you want for a longer duration, leasing could be perfect. Indecisiveness can be cured!



You're at a transitional stage.


You may be expecting to move sometime soon. Will you want the same car back home in the mountains as you had in the city? Or, did you recently change jobs? Maybe your financial situation will be changing? Or possibly planning to start a family a few years down the road and foresee needing a bigger car. All these life predictions are impossible to plan all of the time… unless you're a genie, wizard, or an Almanac. If you have a crystal ball, pssh, you are ahead of the game.



You like (and can afford) the shiny and new.


Since you’re not paying the full price of your vehicle when leasing, your monthly payments are a touch lower than if you were buying the car, and therefore paying the full price at higher monthly payments. (Of course, we’re comparing car payments with the same terms like APR financing and loan duration.) With a shiny and new car often comes the ability to stay up-to-date on better tech and safety features Driving a car in its freshest years can give you both the highest safety and the prime warranty years.



You don’t drive many miles.


Since every lease has a mileage agreement for each year you drive your car, the fewer miles you drive the lower your payments will be. If you’re not putting on 10,000 or more miles on your car each year, leasing may make more sense for you.



Cons of leasing a car



Pesky payments.


While you’re paying less in monthly payments for the same car, as opposed to buying it, don’t count on spending less in car expenses. Most of those pesky service repairs, like changing and replacing fluids, tires and other expenses come out of your pocket when you lease—unless, of course, they’re under warranty. Make sure to read the fine print in your contract to be sure there aren’t any sneaky clauses included.



Poof! It’s gone!


You consistently pay money into something that you have nothing to show at the end of the day. Meaning, you pay your car payment every month and, once the lease is up, you return the car and don’t get so much as a penny it (or your down payment) back. Sure, you get a temporary asset, but no real asset in your name. It’s like when you have a library book—,yeah, you can read it while it's checked out, but once you return it, it's bye bye for good.



Pros of buying a car



The car is yours.


You have all the rights over it as soon as it’s paid off, including no mileage limits. Sure, you still have to get it checked and tuned up, but it’s all yours.



Financing options.


When buying a car, you have plenty of financing options out there. And, most importantly, you need to make sure a new car (whether purchased or leased) is in your budget. You can pay for your car over a series of months, to take off the burden of a huge down payment. Rule of thumb, though: if it’s going to take you more than about 3 years to pay off your car, it’s probably not worth it. Don’t stretch your budget too thin. If you can’t accomplish a 3-year car loan payoff, it may be overexerting your range.



Selling it for profit.


When you decide to move on from this car, you can sell it back into the market. If you took good care of it, and didn’t put too many miles on it, there’s a chance you might be able to sell it for than you owe on your remaining loan. Sure, you’ve already made payments onto your car, and you can’t get those back, but you can at least pad your wallet with some extra cash to help pay for your next car downpayment.



Run it into the ground—if you want!


Without a lease contract, you’re not facing any requirements to return it by a certain timeframe. There are no deadlines and no hidden fees (other than general service and maintenance). In many cases, you can keep this car for 10 years—or more. Mathematically, the longer you keep your car, the lower your cost per use. Think about it: if you have your cars for 10 years, you’re splitting the entire cost of your car into 120 months of payment. You certainly won’t be able to find a car loan with those kind of terms!



Cons of buying a car


Depreciate, depreciate, depreciate.


Sadly, a car will never increase in value. In fact, as soon as you pull your brand, spankin’ new car out of the lot—literally, the second the tires touch the street—your car will depreciate 10-20% in value. That means that, if you tried to turn around and sell it back to the dealership, they’d only pay you 80-90% of what your car is really worth. Opt for buying a used car if you want to leave that depreciation burden on someone else.



Higher payments


When you’re buying your car, you’re paying the entirety of the MSRP, as opposed to a portion of it when you lease your car. In this case, you may need to take out a car loan. To keep that loan from biting you in the behind, create a solid budget and make sure you pay your monthly car payments on time.



The great debate: to buy or to lease your car


Ultimately, buying or leasing your car comes down to where you are in life and what you’re willing to pay for your car. The choice is in your hands. Keep some of these tips in mind for when you’re at the dealership and choosing between a car lease and a car loan. Think about how long you anticipate having the car, how much you’re willing to pay, and what really matters to you. Is it the prestige of a new car every few years or is it the stability of having a car for a while that's all yours? Remember Pocketnest is here to help you weigh these financial decisions.