Is Buying Used Better Than Leasing?
Weighing your options
There are more ways to get into a new vehicle, or one that is new to you, these days than ever before. Many people consider the savings of buying a quality used car and also look into leasing a car rather than buying a brand new vehicle. Both of these options can save you money, but which is right for your needs? Is buying a used car better than leasing? Let's find out.
Leasing a New Car
When you lease a car, you are basically renting a new car from a dealer for 36 to 48 months. Once the lease period ends, you can either return the vehicle to the dealer, or return the vehicle and get a new one, or you can purchase the car from the dealer for a predetermined amount as defined in your lease agreement. Advantages to leasing include that your monthly payments may be lower if you lease rather than purchase a new vehicle, and you can often afford a more upscale model car.
Your monthly lease payment is based on the Sale Price that you negotiate with the dealer, just like when you buy a car. It also depends on the Length of the Lease; the number of months you agree to lease the car. With a lease you also have to consider the Expected Mileage. The lease contract sets a certain maximum number of miles you can drive per year. Most leases come with a 10,000-mile annual allotment. Your monthly payment will go higher if you drive more than 10,000 miles. In other words, you'll owe extra money for every extra mile you drive when you turn the lease car in at the end of the lease.
With a lease, you also have Residual Value. This is the value of the car at the end of the lease, with its depreciation figured in. If you decide to buy the car after the lease expires, this is the amount you'll pay. Other factors include a Rent Charge, Taxes and Fees that are added into the lease and affect your monthly payment. Some dealers or car companies also require a Down Payment for a lease car just like buying a used car. The more you put down up front, the lower your monthly lease payment will be. Usually, the monthly payment is considerably less than it would be for a car loan. For this reason, some folks opt for a more luxurious car or a vehicle with a higher trim level to lease than they would normally purchase.
Another upside of leasing is that you get to drive a brand new car every few years. If you like to change up the look and feel of your ride, and always experience the latest safety technology such as Driver Assist, leasing lets you return your vehicle for something new and exciting. You also don't have to worry about car maintenance because your new lease car includes a warranty for at least three years, so any repairs and ongoing maintenance is covered. That equates to more savings in your pocket.
With a lease you never have to deal with resale, you just return the car. The only thing you have to worry about is paying any End of Lease Fees, including those for abnormal wear and tear including any dents, dings, or scratches to the vehicle, or additional mileage on your program. Just remember to check with your car insurance carrier to make sure your insurance covers any charges that may still be due; such as if the car gets totaled before the lease runs out.
Pros to Leasing
- Lower monthly payments than a new car loan
- No repair costs and low maintenance
- Drive the latest model every three to five years
- Low money up front or no down payment
- Pay less sales tax than a new car
Cons to Leasing
- You're not building equity in the car
- If you go over the Expected Mileage, you'll pay more
- Taxes and fees add to your monthly payment
- You have to keep the car pristine and maintained
- You'll pay for dents and dings
Buying a Used Car
With buying a quality used car, you find a vehicle you want to buy and either pay for it on the spot, or get a loan and make monthly payments until the loan is paid off. Many people would prefer to buy used rather than lease, especially if you can get a low financing rate on your used car loan. One of the big advantages of buying a used car is that the car has already depreciated. A new car loses up to 40 percent of its value in the first three years. By purchasing a good used car that is three or more years old, you can save up to 40 percent over the cost of a new car.
When you purchase a used car, you may have higher overall costs when you factor in the loan payment and ongoing maintenance when compared to a lease vehicle, but you will own the car and can do whatever you want with it because it is yours. Paint it purple. Put in a glass pack to wake up your neighbors. While a lease vehicle might sometimes have lower monthly payments, you'll never own the car. In fact, you can get into a cycle where you keep trading for a new lease car every few years and never stop paying for a vehicle.
Many people are choosing a lease over a new car loan these days because various trends have changed the leasing landscape. Rather than lease a luxury sedan, consumers are turning to small SUVs as their vehicle of choice and attractive low finance rates make leasing an even better deal. But depending on the price, buying a used car may offer the greater savings overall. People are keeping their used cars for a longer period of time because vehicles are built to last longer these days. It is not unusual to keep driving a car for up to 200,000 miles without serious mechanical issues.
Pros to Buying Used
- Modify your vehicle as you please
- Save money over buying new
- You can sell or trade in the vehicle at any time
- No mileage constraints, restrictions or guidelines
- No wear-and-tear charges
- Auto insurance will cost less than a new or leased vehicle
Cons to Buying Used
- Possibly higher monthly payments than leasing
- Ongoing maintenance expenses
- Continued depreciation
- Longer term investment
- Possible down payment or trade in of your old car
Let Lithia Help!
Whether you're interested in buying a quality used car or leasing a new vehicle, Lithia Motors has your back. We'll answer all your questions and make getting into a new car, or one that is new to you, the easiest choice ever. Find a Lithia Auto dealer near you right here.
