Sponsored by JPMorgan Chase
By Aaron Allen, The Portland Medium
In today’s challenging economic climate, making informed financial decisions about significant purchases, such as vehicles, is more crucial than ever. With inflation, high interest rates, and rising costs for essentials like gas and food, understanding the best approach to acquiring a vehicle—whether through buying or leasing—can have a lasting impact on your financial health. To help consumers navigate this decision, financial experts say that it’s important for consumers to understand the pros and cons of each option, to ensure that you make the choice that best suits your needs and goals.
Paul Bulter, a Chase community manager, believes that major financial decisions are personal choices that people need to make base on their lifestyle and current situation.
“Should I buy or lease a vehicle? As with many major purchases, there’s no definitive answer,” says Bulter. “But both options have specific pros – and cons – depending on your transportation needs and financial situation. Here, we help you break it all down.”
According to Bulter, there are distinct differences between leasing and financing
“Leasing and financing both provide you with a vehicle,” says Bulter. “But the payments yield different results. Think of leasing like renting an apartment while financing is like buying a house.”
“When you lease a car, you borrow it for a certain amount of time and make monthly payments for its use. Once the term is over, you return the car or opt to buy it, if buying is permitted under the lease contract,” Butler continues. “When you finance a car, you take out a loan or installment financing and make monthly payments to a lender until it’s paid off. Once all payments are made, the vehicle is yours to keep for however long you please.”
To help consumers make an informed decision, Butler outlines five key pros and cons of leasing versus buying a vehicle:
Leasing A Car: Pros and Cons
Pro: Potential for Lower Monthly Payments
Leasing a vehicle can often result in lower monthly payments and, in some cases, a lower down payment. Many new leases also include maintenance and repair coverage under the manufacturer or dealer, which can save you money over time.
Pro: Ideal for Local Driving
Leasing can be advantageous if you don’t drive long distances. Most leases come with a mileage limit, and as long as you stay under that limit and minimize wear and tear on the vehicle, you can avoid excess use penalties.
Pro: Access to New Models Regularly
For car enthusiasts who enjoy driving the latest models, leasing offers the flexibility to upgrade to a new vehicle every few years. The average lease term is 36 months, after which you can return the vehicle and lease a new one.
Con: Additional Fees for Excess Use
Leasing can come with additional costs if you exceed the mileage limit or if the vehicle incurs damage beyond normal wear and tear. Early termination fees and other penalties can also add up if you decide to end the lease early.
Con: Continuous Monthly Payments
One downside to leasing is that you’ll always have a monthly payment. Unlike financing, where you eventually own the vehicle outright, leasing requires you to start a new payment cycle with each new lease.
Buying A Car: Pros and Cons
Pro: Ownership After Payoff
When you finance a vehicle, it’s yours to keep once the loan is paid off. This means you won’t have to worry about negotiating a new lease or getting another vehicle unless you choose to do so.
Pro: Unlimited Mileage
Buying a car is ideal if you plan on driving extensively. Whether you’re going on road trips or relocating, you won’t have to worry about mileage limits or fees that can come with a lease.
Pro: Payments Eventually End
One of the most significant advantages of buying a car is that your payments will eventually end. Once your vehicle is paid off, you’ll have more flexibility in your budget to focus on other financial goals. Additionally, owning a car gives you the option to sell it for cash if your plans change.
Con: Higher Upfront Costs
Financing a car often requires a higher initial investment. With car prices relatively high, you may need to make a substantial down payment before your monthly payments even begin.
Con: Responsibility for Maintenance
When you own a car, you’re responsible for all maintenance, inspections, and repairs. Unlike a lease, which might include these services, owning a car means budgeting for these additional expenses.
How to decide between buying or leasing a car? Some people might choose to lease because they don’t drive a lot, or because they like having the option to get a new car in a few years. Others might like the permanency of financing a car to purchase, especially if they find deals on an older used car and can pay it off quickly.
“Whether leasing or buying a car, it’s always a good idea to do your research, set a budget, and improve your credit score, if necessary, to ensure you’re getting into a car you can afford,” says Butler. “Assess both your short-term and long-term financial goals and be sure to understand the terms of your lease or loan so you aren’t surprised by unexpected costs. Then, the choice is yours happy driving!”
For more information, tips, and tools visit chase.com/auto.
