Should I Lease or Buy a New Vehicle?

If you're itching to take home the latest Ford truck model, or you want to adorn your driveway with a brand new car, you're often left with two choices: buy new or lease. Let's break down the pros and cons of both:

Pros of Leasing a New Car

Perhaps the top benefit of leasing a car is that you get a new car for a lower monthly payment than you might have if you took out a loan for the entire price of the car. This is because when you're leasing a car, you're covering the price of depreciation, not the overall value of the car.

Since you're only paying for depreciation and other "rent charges" (interest) as well as a few fees, you can often lease a new model that you otherwise couldn't afford to buy. If you like newer, high-end models, and you don't like paying for maintenance and repairs, then leasing can be attractive.  Your monthly payment will be more affordable, and you get the added benefit of having the latest model in your driveway every three years.

Cons of Leasing a New Car

Although the monthly payments for leasing a new car are typically lower, leasing is more expensive in the long run. That's because you aren't building up any equity, like you would when you buy. At the end of your lease, you either sign a new lease or take out a loan to buy the car (essentially buying it "used"). There are also "lease to own" options, which are typically more expensive than buying the car in the first place.

Lease agreements also include limits on mileage, and if you drive your car a lot, then you will get charged for the extra miles. Buying may be a better option if you plan on driving your car more than a "typical driver," although higher mileage also decreases its resale value.

Another drawback is if you want to end your lease early, there are usually significant early termination fees-sometimes up to half a year's worth of payments. Unless you plan on driving the car for the entire three year term, then it's probably a better idea to buy.

Pros of Buying a New Car

Buying a new car generally offers more flexibility than leasing. You don't have any mileage restrictions, and when you're done paying it off, it's yours.

If you plan on keeping your car and driving it into the ground, then buying is the best way to go. The up-front costs may be higher than leasing (down payments, taxes, higher monthly payments for the loan), but remember that when you've paid it off and you own the car outright those costs go way down.

Cons of Buying a New Car

Buying a new car is a bit of a gamble, since you can never be exactly sure what the resale value is going to be several years down the road. It's also possible to get "upside-down" on a car loan, meaning that you owe more than the car is actually worth. However, these problems shouldn't worry you if you plan on keeping your car for its entire life.

New cars also typically require large down payments and larger monthly payments than leasing. If you can't afford this up-front cost, you can either get an extended loan (and pay more interest in the long run), or choose to lease. You can always buy used as well.

It Comes Down to Your Lifestyle

The decision to buy or lease often comes down to personal preference, not money. If you like the peace of mind that comes with not having to worry about maintenance costs or breaking down, then leasing can be a good option. If you prefer getting a car and driving it until it won't run any more, then buying is the smarter option.

To learn more about Ed Kenley Ford's leasing and buying options, call us today at 888-480-2945!

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