Should I Lease or Buy a New Car?

Aug 30, 2023 3 min read

In the market for a new vehicle? Once you’ve settled on make, model and trim, it’s time to decide whether to lease or buy the car. Here’s how to know which option is the right financial decision for you. 

Reasons to Lease a Car

With a lease, buyers make a monthly payment to drive a new car for a set term. That payment is often less than the monthly cost of financing a new vehicle, but buyers must return the car at the end of the lease term. Here are five reasons to lease a car: 

  1. You Like Driving a New Vehicle Every 3 Years

Some people love driving a brand-new set of wheels, or maybe you’re addicted to that new car scent. Or it could be that a sleek sedan appeals to you now, but you know that in a few years, you’ll need more space, such as an SUV. Whatever the reason, if you prefer driving something new, leasing could be the best fit.  

  1. You’re a Low-Mileage Driver

If you typically log between 10,000 and 15,000 miles per year, leasing a car might make more sense than purchasing one. Just be aware that if you exceed the mileage listed in your contract, you could be charged a hefty fine at the end of your term. If you anticipate putting a lot of miles on your car, but you still want to lease, ask about pre-purchasing extra miles at the time of your contract negotiations.

  1. You Have Good Credit and Are Financially Stable

If you’re in a comfortable financial position, leasing is a good option. Once you sign the contract and drive your new vehicle off the lot, you are legally obligated to fulfill the financial terms associated with the vehicle. So if you decide you want to terminate your lease before it’s over, or you’re having a hard time making the payments, you could face large penalties. When leasing, be prepared to keep your vehicle until the end of your contract.

  1. You Take Good Care of Your Vehicle

Just like renting a house or an apartment, you’ll be required to put down a security deposit on your leased vehicle in the case that it’s damaged at the end of your term. If you have kids who are prone to spilling ice cream or you have trouble keeping your car scratch-free, you may want to consider purchasing a vehicle instead.

  1. You Want a More Expensive Car

Often, when leasing a car, you don't have to put down as much cash up front. You'll also find that your lease payments are much lower than if you had purchased the car and gotten an auto loan. In most cases, your leased car is still covered by the manufacturer’s warranty, so you can also expect to spend less on maintenance costs.

Reasons to Buy a Car

When you finance a new car, you may have higher monthly payments for the duration of the loan than you would with a lease. But if you plan to keep the car for years to come, you’ll get to enjoy owning it outright once you’ve paid off the loan. Here are five reasons to buy a car: 

  1. You Do a Lot of Driving

The mileage limits of a lease can impede how much and how far you wish to drive. When you own the car outright, you’re free to drive as many miles as 

  1. You Have Enough Cash Saved Up for a Down Payment

Typically, you should aim to put down 20% of a new car’s purchase price. This means that if you’re buying a new car worth $60,000, you’ll want to put down at least $12,000.

  1. You’re More Concerned with Long-Term Value Than Upfront Costs

If you buy a car, you may have to make higher monthly payments for a handful of years, but the payments end when the loan is paid off. Conversely, if you continuously lease, you’ll always have monthly payments.

  1. You’re Well-Versed in Car Maintenance and Upkeep

As cars age and parts wear out, the mechanic bills tend to increase. If you’re handy under the hood and committed to properly maintaining your vehicle, this shouldn’t be a problem.

  1. You Don’t Mind Driving an Older Car

New cars can lose 15%–25% of their value in the first five years of ownership, but if you are the type who buys and keeps a car for years, then depreciation shouldn’t matter. It’s cheaper overall to buy a car and hold onto it for as long as possible.

Safeguard Your New Car

When it comes to leasing or buying a car, you have lots of options. But rest assured that when you choose auto insurance with Farm Bureau, you are choosing a company that offers a range of options to help keep you safe, both on the road and off. Talk to your Farm Bureau agent to learn more

Want to learn more?

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