My fiancée and I are trying to plan for our future, which can be difficult when it comes to transportation. Cars are costly to run and can have mechanical issues leading to more expenses. While my fiancée drives a newer car, my car is old and will need to be replaced within the next few years. Leasing is always a possible option, as is buying a used car. Both have advantages and disadvantages of course, which makes choosing a route a tough decision because there’s really no right answer.
Leasing: The Safer Choice?
Similarly to renting versus buying a home, leasing a car is paying for the use of the vehicle. The down side is that your payments are accumulating no value. The difference is leasers usually make a down payment for the car and have the option to buy for the depreciated value at the end of the lease term. The nice part about leasing is that if the car has any mechanical issues, you will not be on the hook for the payment. You can also just hand over the keys after your lease term is up to avoid any further hassle a potential hidden mechanical damage can cause your wallet.
The biggest danger with leases, though, is that the smaller upfront and monthly costs allow drivers to get a more expensive car than they can afford to buy. If my fiancée and I lease a car, we will have to keep in mind where we will be living. Lease terms include a certain number of miles a year, so we’d have to pay extra if we go over the set amount.
Buying: Better Long Term?
Buying new instead of leasing has significantly higher savings in the long term. If you can afford to buy new, you will most likely have a warranty to cover mechanical issues. Your down payment and monthly payments will be higher, but in the end, you are paying towards the value of the car. The speedy depreciation of cars makes this accumulation less significant than that of homes, but it is present.
My fiancée and I will not be in a position to buy new when the time to get a new car presents itself. So we are more interested in used vehicles. I have had some luck with cars costing less than $5000 over the past 8 years. These provide a small cost and can last for a number of years.
The problem with used cars is if they break down, you are on the hook for fixing them. If you buy a used car and the transmission blows within a month, you will have to tack on a large cost to your purchase.
Which is Best?
My fiancée and I will need to do more research before making our decision between buying used versus leasing. Leasing is a safer option in a sense that the cost are known, while buying used usually offer a better long term return. There are pros and cons to both, but which route do you prefer?
David’s Note: From a financial standpoint, buying used will almost always be a cheaper option than leasing a car. Leasing is a common choice in our society, but do know when you decide to lease that you are satisfying your desires by paying more than you need. The choice is yours, but consider your circumstances carefully before you take the plunge.