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Leasing vs. buying a car: Which is best for you?

Whether you're searching for a sporty little midlife crisis splurge or you need a reliable crossover SUV to haul your kids to soccer practice, deciding between leasing vs. buying a car can be challenging. The truth is, there's no clear-cut answer that applies to everyone. Your personal preferences, budget, financial goals, driving style, and transportation needs all factor into the decision.

Is it better to lease or buy a car? Here's a breakdown of all the details to help you decide.

Leasing vs. buying a car

It helps to understand both options fully before you choose leasing vs. buying a car. Think of leasing a car the same as you would leasing an apartment. You can use it as your own, but there are limitations because you don't truly own it. It's like a long-term car rental.

You lease a car for a specified length of time—usually 24 to 36 months. Every month, you make your payment in exchange for the use of the vehicle. At the end of the lease, you turn the car in and either lease something new or buy a vehicle. You might also have the option to buy the leased vehicle at the end of the term.

You have free rein to drive your leased car how and where you want, but you are limited on things like how many miles you can drive and what modifications you can make to it. Going beyond those limitations usually means you'll pay up in the form of extra fees.

Buying a vehicle means you gain the title and have ownership over it. You can either pay cash and own it outright immediately or finance it and make monthly payments until you've paid it off. When you buy a vehicle, you have full control over what you do with it, including how many miles you drive and what modifications you can make.

Is it worth leasing a car?

Life would be so much easier if everything was cut and dry, but alas, it's never that simple, even when it comes to leasing vs. buying a car.

Making a list of pros and cons can help you weigh out all your options and see which makes more sense for your situation.

Pros of leasing

Is it better to lease or buy a car? These pros of leasing could encourage you to lean toward that option.

  • Shiny new wheels:

    Love to keep your vehicles fresh and new? Leasing makes it easier to enjoy a new ride every few years. When your lease is up, you can choose something fun and new. You get to enjoy updated vehicles, and you can turn them in before they start having expensive mechanical issues.

  • Lower payments:

    If you want to keep your monthly costs low, a lease may help. You'll usually have smaller payments to lease a vehicle than you would to buy the same car. Leases also usually cost you less upfront than buying, which could require a larger down payment.

  • Parting options:

    When you're at the end of your lease, you don't have to worry about finding a buyer or getting top dollar for your trade-in. You might also have a buyout option if you want to keep the vehicle at the end of the lease. Possibility of free maintenance: Some leases include some nice perks like free oil changes and other covered maintenance. This can keep your overall car costs lower.

Cons of leasing

Before you rush to the closest dealer to sign a lease, keep in mind that it's not all glimmering new vehicles and lower payments. Leasing a car has some potential drawbacks that could encourage you to buy instead.

  • It's not really yours:

    Sure, you can roll up to your next night out or PTA meeting in your newer vehicle, but you don't actually own the vehicle. Leases come with restrictions when it comes to things like modifying the vehicle. You don't have to worry about selling it or negotiating a higher trade-in value when you get rid of it, but you also don't have any equity invested in a leased vehicle.

  • Mileage limits:

    If you're a road trip type of person, you might want to rethink a lease. You're usually limited on how many miles you can drive without being charged extra. The mileage limits might seem high, but they add up quickly, especially if you like to hit the open road frequently. Even if you're not big on road trips, it can feel restricting knowing you can only drive so many miles before you pay extra.

  • Constant payments:

    You know that feeling of making your final payment? That sense of accomplishment and relief knowing you have a little more room in your budget? You never reach that achievement with a lease. When one lease is over, you could go into the next one. So, while your payments are lower than they would be if you bought, you'll always have them as long as you lease.

  • Additional fees:

    Want to modify your car? There's a fee for that. Went a little too hard and now there's excessive wear? There's a fee for that, too. Want to end the lease early? You guessed it—that also costs you more. Comb through the fine print so you know what type of fees and charges you could face.

  • Approval difficulties with poor credit:

    If your credit has been through the wringer, a lease might not be the best option. If you qualify with less-than-stellar credit, you could pay more and have less favorable lease terms.

Is it better to buy a car?

No matter how you feel about leasing a vehicle, it's a good idea to explore the idea of buying as well so that you can make an accurate comparison between both options. Just like leasing, buying a car comes with both positives and negatives. Breaking them down can help you decide if it's the right move for your next set of wheels.

Pros of buying

Why would you consider buying in the leasing vs. buying situation?

  • End in sight to payments:

    If you lease one vehicle after another, you never get a break from payments. Buying a car means you'll make payments only for the length of the loan. After that, the monthly payments go away until you decide to get a new vehicle.

  • Value:

    When you buy a car, you could have some equity in it. Leased vehicles aren't really yours, so you typically don't have any value in them. Because of this, you can sell the vehicle or use it as a trade-in when you're ready to upgrade.

  • Control over the vehicle:

    A purchased vehicle is yours, so you can use it how you want. You can drive across the country five times a year if you want without worrying about how much the mileage will cost you. Owning a vehicle means you can make any modifications you want. Add turbochargers, get a custom paint job, or install a spoiler—you're in control.

  • More vehicle options:

    When you buy, you can choose any vehicle of any age. On a limited budget? You can go back in a few more years and get a cheaper option.

  • No unexpected fees:

    Your purchased vehicle won't cost you fees for things like going over the mileage or having excessive wear and tear. This can eliminate some unexpected expenses.

  • Parting options:

    Because you own the vehicle, you can decide what you do with it when you don't want it anymore. You can trade it in, sell it, pass it on to your kids, or donate it to a charity.

Cons of buying

Buying a car isn't all sunshine and rainbows. Here are some drawbacks to consider before you head to the bank for a car loan.

  • Higher monthly payments:

    Sure, you'll eventually own your vehicle outright. But until then, you'll typically pay larger monthly payments than you would if you leased the same vehicle. That can make the payments difficult if you're on a tight budget.

  • Larger down payment:

    You generally have to pay more upfront to buy a vehicle than to purchase it. This can be difficult if you don't have much saved and don't have a vehicle to trade in.

  • Potential for being upside down:

    Cars depreciate quickly—usually

    about 20% in the first year

    alone. After 5 years, cars usually lose about 60% of their value. That means you could be upside down on your loan for years, which could keep you financially stuck.

  • Maintenance costs:

    Some leases come with included maintenance. With a purchased vehicle, you're all on your own. Every oil change, tire rotation, and checkup is your responsibility, which could drive up your overall vehicle costs.

  • Limited warranty:

    If you buy a new vehicle, you'll have a warranty initially. But if you keep your vehicle long term, your warranty days will eventually come to an end. That means if your transmission goes out the day after your warranty ends, you're paying for it all yourself, which could lead to dipping into your savings. Leases typically have warranty coverage the whole time.

Varo offers an online savings account that includes no hidden fees and automatic savings tools, so you can save up for your next ride if you're looking to buy.

Is it better to lease or buy a car?

It's the million-dollar question—is it better to lease or buy a car? Like so many things in life, it comes down to your individual situation. For some people, leasing makes more sense. Others get more benefits out of buying.

Is leasing a car worth it? It could be in the following situations:

  • You like to upgrade your cars frequently with the latest models and advanced features.

  • You prefer lower monthly payments.

  • You don't mind always having a car payment.

  • You have less money to put down upfront.

  • You don't go on long car trips.

On the flip side, you might prefer buying in these situations:

  • You want to keep your vehicle longer than a few years.

  • You regularly drive more than 12,000 to 15,000 miles per year.

  • You want to modify your vehicle without restrictions.

  • You want to pay cash or buy the vehicle outright without financing.

  • You want ownership over the vehicle.

When it comes down to it, you have to decide which option works best for your lifestyle and financial situation. Both options come with expenses that you can't always predict.

You could face large fees at the end of a lease—just like you could deal with a major repair on a purchased car. You have to balance cost, the overall experience, and what you want out of a vehicle.

Think about your financial situation and budget. Consider how much you drive and how you want to use your vehicle. Using what you know about leasing vs. buying a car, envision how each option would work for your situation.

Bottom line: Leasing vs. buying a car

Is it better to lease or buy a car? In the end, both options work. You get the ride you need, and you have options for finding financing that works for your budget.

Look at the pros and cons of each and think about what feels right for your lifestyle. Compare the payment options to find the method that best fits your financial situation.

If your credit needs a little help before you shop around for your next car, try the Varo Believe Card to start building your credit today. It could help you get a credit score or improve an existing score so you can qualify for better lease or financing terms for your new ride¹.

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