If you’re shopping for a new car on a budget, you might be considering a used car or a lease. Used cars and leases are typically less expensive than buying a brand-new car.
Before you decide to lease or buy a used car, there are several factors to take into consideration. Let’s look at the pros and cons of leasing a car vs. buying a used car.
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Advantages of Buying a Used Car
Buying a used car is a great option for many drivers, especially if you’re looking for a good deal. Here are some reasons why you might consider buying a previously owned vehicle.
- Lower out-of-pocket expenses. Used cars have less value than brand new cars, so your initial costs are often lower than when purchasing a new car. Depending on the age of the vehicle, you might still get some features and benefits of a newer model.
- Imperfections aren’t as bothersome. It’s common for used car to have a few dings or dents, so you don’t need to stress so much over getting that first scratch.
- You might pay less for car insurance. Depending on factors like your location, driving record, age, and claims history, your insurance costs are often lower when you insure a used car.
Disadvantages of Buying a Used Car
While buying a used car has many benefits, but there are also some downsides. These are some of the disadvantages of going with a used car.
- You can’t customize a used car. When you buy a new car, you get to choose the features you want, such as interior and exterior color, the sound system, and whether it has a sunroof. A used car comes as is, and there are fewer opportunities to make changes or upgrades.
- Maintenance and repair costs are your responsibility. Car maintenance is important, especially if you want the car to last a long time. New cars usually come with a manufacturer warranty, which you don’t get when you buy a used car. You’ll be paying for repairs and maintenance out-of-pocket unless you buy an extended warranty from the dealer.
Advantages of Leasing a Car
Leasing a car allows you to drive a new vehicle every few years. It’s a good option if you want a car with the latest features and technology, without the commitment and high cost of ownership. Here are a few good reasons to consider leasing a car.
- Enjoy many of the advantages of a new car. Leasing gives you the advantages of having a new car, like the newest technology and a warranty, at a much lower cost than buying new.
- Your costs are lower. When you lease, your initial out-of-pocket expenses, as well as your monthly payments, are much lower than when buying a new car. Some leases don’t even require a down payment.
- Don’t worry about depreciation. When you lease a vehicle, you don’t have to deal with depreciation or loss of value. Simply return the car at the end of the lease period and the dealer takes responsibility for any depreciation.
- Simplify your taxes. If you lease a vehicle for business purposes, you can usually write off gas and mileage on your taxes.
- You can have a new car every few years. After your lease period ends, you get to turn the vehicle in and lease a new one. You can enjoy having a new car every few years without committing to ownership.
Disadvantages of Leasing a Car
Many drivers enjoy leasing, but it’s not the right choice for everyone. Here are some downsides of leasing a car that you should be aware of before choosing this option.
- You always have payments. When you constantly lease a vehicle, you always have monthly payments to make, and you will never own the vehicle (unless you buy it at the end of the lease period).
- You’ll pay more for car insurance. You might pay higher car insurance premiums when you lease a vehicle. Plus, lenders often require lessees to carry full coverage car insurance, which is more expensive than minimum coverage.
- You might have to pay penalties for extra miles. When you lease a car, you must return the car under a certain mileage. If you go over those miles, you often have to pay penalty fees.
- You might get charged a penalty for wear and tear. If you return the leased vehicle with dings, scratches, or stained upholstery, you can face penalties charges if the leasing company feels the car was returned in worse shape than when first leased.
- You can’t make any changes to the vehicle. Because you’re basically renting the vehicle, you can’t make any changes or modifications to a lease.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.