You’ve decided it’s time for a new car. You’ve figured out what type of car you’d like to drive and have started to figure out what your options are financially. You can either purchase the car upfront with cash, lease a car, or purchase with a loan. Assuming you aren't able to buy the car upfront, what is the next best option for you financially – leasing or purchasing the car? Let's explore both of these options and see which option might make the most sense for you.

When you lease a car, you are essentially renting the vehicle for the terms set in the lease. You make monthly payments; however, they aren't going towards the cost of the car, but towards the depreciation of its value. You agree to keep the car for the terms of the lease and then have the option to purchase the vehicle or give it back to the dealership. Keep in mind that if you choose to buy after the lease is up, the price may be more expensive than if you were initially going to purchase the car upfront.

Leasing can be a good option for you due to lower monthly payments. If you’re someone who wants to keep up with the newest models and you enjoy driving higher end cars, leasing a car can make that more affordable.
Of course, there are a few drawbacks as well. You need to stick to the terms of the lease or pay more for the car than anticipated. For example, there might be a restriction on how many miles you can put on the vehicle. If you go over the mileage, you may have to pay a small amount per mile over the limit. It's also crucial that the car remains in impeccable shape or you may be liable for some wear and tear fees at the end of your lease.

Purchasing a new or used car can be a great option if you plan on having your vehicle for many years to come. If you have kids or do a lot of driving, this option may be the better one for you. The main perk in purchasing is that when you finish paying off the cost of the car, the car payments stop, and the car is officially yours. This is different for serial leasers who will never be without a car payment.

The best choice between leasing and owning a car is entirely up to your needs, lifestyle, and financial situation.
If you're looking to purchase a new or used car, get an auto loan from Sikorsky Credit Union. We have excellent, low rates that make car buying affordable for you. For more information about our terms and rates, please click here.

Source:
Csiszar, J. (2019). What Is the Difference Between a Lease & Finance?. [online] Budgeting.thenest.com. Available at: https://budgeting.thenest.com/difference-between-lease-finance-22259.html [Accessed 12 Jul. 2019].