4 Reasons to Lease a Car (and 4 Reasons to Own One)

There’s you, the car dealership and your I’m-not-leaving-until-I-get-the-best-deal-ever poker face. But should you lease or should you buy? Unfortunately, it can be a tough—and confusing—financial decision to make. That’s why we consulted Ron Montoya, senior consumer advice editor for Edmunds.com, to break it down.

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Pros of Leasing a Car:

You’ll probably have a lower monthly payment. Since a lot of us think of our budget by the month, this is a biggie: Leasing means you could spend roughly 30 percent less on monthly payments compared with the monthly cost of a loan to own a car. In fact, 2017 data has shown lease specials offered by dealerships going for as low as $200 a month compared with $500 a month if you buy a brand-new car. The reason for the lower rate is that the vehicle manufacturer often subsidizes monthly payments on a car lease. (Hey, they want to move their merch, right?) The only caveat: Additional—read: pricier—insurance is usually required if you don’t own.

Your car will always be under warranty. Lease or buy, the typical length of a warranty on a new vehicle is three years. Ditto the length of a lease agreement, which means that manufacturer defects (like a faulty battery or glitch with the car’s state-of-the-art stereo system) are always covered under the terms of your lease. Keep in mind: A warranty doesn’t cover the cost of regular maintenance like an oil change or rotating your tires. But compared with owning—where you’re responsible for any issues that crop up after the warranty ends—this can result in a lot of savings.

You’ll pay a lot less in sales tax. FYI, sales tax is based on the portion of the car you’re actually using. This means, when you lease, you only have to pay sales tax on the amount the car will depreciate during your lease term. Stay with us here: For example, a new vehicle that’s worth $30,000 bought brand-new off the lot might only be worth $14,000 at the end of a 36-month lease term. That means, your sales tax is based on $16,000 vs. the full cost.

You’re more likely to be able to afford a better car. We repeat: Car payments are lower by the month when you lease. This means you might have wiggle room in your budget to consider a vehicle—say a mid-size versus an economy option—that’s a bit higher-end. Score.

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Pros of Buying a Car:

It’s a lot less expensive as long as you own it long-term. The typical loan agreement for buying a new car is about 69 months, according to 2017 data. This means that if you’re planning to own your vehicle for more than six years, you eventually won’t have car payments at all. (Yay, #goals.) With a lease, it’s the opposite: You’ll always have a monthly car payment.

You won’t have any mileage restrictions. Yep, when you lease a vehicle, your contract typically comes with limitations on how many miles you can clock per year. (In most cases, you’re restricted to 10,000 to 12,000 miles annually—after that, you’ll pay around 25 cents a mile for any overage.) When you own, you can drive cross-country and back every month at no additional cost if you want. (Can we come?)

Owning means you have equity. Basically, when you’re ready to trade in your vehicle, you can put its current value toward the cost of a new car. When you lease, your monthly payments don’t go toward owning. Instead, you’re given an option to buy at the end of your contract that’s calculated based on the residual value of the vehicle after three years of use.

You can treat your vehicle however you want. If you own, Godspeed; you can plaster your car with all the “My Kid’s an Honor Roll Student” bumper stickers you desire or shuttle your mud-covered golden retrievers to and from the park. On the flip side, when you lease, excessive wear and tear on the vehicle can result in additional charges when you return the car to the dealership, which means you might want to leave Fido at home. Womp womp.

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