Lease or Buy: What you Need to Know

Lease or Buy a Car?

You have two main options to acquire a new car – lease or buy. The best option for you will depend on your lifestyle, financial situation, and future plans. When leasing, you are essentially renting the car. Obviously, buying the car involves paying for it right away either with cash or financing, and it is yours to keep. Both methods have pros and cons, and the better option for you will depend on your personal lifestyle, financial situation, and future plans.

Should I Lease or Buy my New Vehicle?

The Three Year Rule

Most leases are signed for a three year term. That means that the leasing portion of the agreement expires after 36 months, at which time you return the car or pay the agreed to price to purchase and keep it. However, buying it after a three year lease is not usually a financially wise decision, so you should really only lease if you intend on giving the car back at that time. People who are happy leasing cars are those that always want to be driving a newer vehicle. If you continue a pattern of leasing cars one after another, you will never be driving a car that is more than three years old. It is nice to always have a new vehicle, but you will end up spending more in the long run than you would by purchasing the car outright.

How Many Miles do you Drive?

Along with the three year lease agreement comes regulations on how many miles you can drive per year. Often that number is set at around 12,000-15,000 depending on the specifics of your contract. For many people, that is enough mileage for a year’s worth of driving and the limit won’t be a problem. However, if you average more miles than that in a year, leasing will not work for you. The overage charge for miles that exceed that limit is very high, and will end up costing you big dollars at the end of the year. If the vehicle is expected to go anywhere past 15,000 miles in a year, you can cross the lease option off of you list.

Worry Free Lease

One of the biggest advantages to a lease is simply that you don’t bear the responsibility of owning the car. If something goes wrong with the engine or another vital part of the vehicle, it is the dealer’s problem to take care of. For some, the peace of mind that this brings is worth the extra expense of leasing over buying. It is worth considering, however, that new vehicles come with a manufacturer warranty that will protect you in many of the same ways that a lease agreement will.
As with most life decisions, there is no one right or wrong answer here. Leasing and buying can both be viable options depending on your personal goals and preferences. It may also be worth talking to the dealer about both options, and having them help you work through the numbers until you settle on the plan that is right for you.

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