What are the advantages and disadvantages of buying or leasing an automobile?
Buying A Car
Advantages | Disadvantages |
You own, or have equity in, an asset as the car loan is paid off. | You are tying up cash in an asset that is losing value. |
You may drive the car as much as you like without paying a per-mile fee. | The car may not be worth much when it comes time to sell it. |
If you are going to "run your car into the ground," buying may be the cheaper way to go. | The older a car gets, the more expensive it is to maintain and the less reliable it is. |
Leasing A Car
Advantages | Disadvantages |
You have the opportunity to invest the cash that you would have otherwise used for a down payment. | You are making payments similar to rent and have no equity (value of the car) to show for it. |
The warranty will likely extend over the full term of the lease; therefore, repair costs could be minimal. | The total amount of miles you drive the car without paying a per-mile fee will be limited. |
You only pay for the car for the time you use it. You may be able to drive a more expensive car that you otherwise could not afford to buy. |
Key Considerations
You can't make the buy or lease decision simply by looking at a list of advantages and disadvantages.
You need to answer some questions first. Answer the following two questions to see if you are more of a lease candidate or a purchase candidate:
If you answered "yes" to the above two questions, then leasing is probably not for you. If you answered "no" to one of the questions, then you need to further evaluate if leasing or buying is the choice for you.
Other factors to consider to decide if you should lease or buy include the following:
Investment products and services are offered through INFINEX INVESTMENTS, Inc. Member FINRA/SIPC. The Investment Center at South Shore Bank is a trade name of the Bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.