COMPARED: Leasing Cars vs. Buying with An Auto Loan

Investing in a car with a normal car loan is pretty straightforward: You just borrow money from a bank, credit union, or another lending institution, and then make monthly payments for some number of years.

A part of each payment is interest and the rest is the principal, so the higher the interest rate, the higher your payment. When you repay the principal, you build equity until the car becomes all yours.

With recent hikes in car prices, leasing a vehicle has instead become a more acceptable alternative to buying. With leasing, buyers will make a monthly payment to drive a new car for a predetermined term. This payment is often much less than the monthly cost of financing a new vehicle, but buyers have to return the car at the end of the lease term.

Here’s a comprehensive list of the pros and cons of leasing to help you determine if leasing is right for you.

The Advantages of Leasing

You drive the leased car during its completely hassle-free years.

You always drive a late-model vehicle that’s already covered by the manufacturer’s warranty, which might even include free oil changes and other scheduled maintenance.

Its predictable monthly payment with no extra surprise repair costs often makes it easier to stick to your household budget.

You can even drive a higher-priced, better-equipped vehicle than you might be able to afford otherwise. This will allow you to opt for certain lifesaving safety features that aren’t available on lower trims or on used cars.

The Disadvantages of Leasing

If you lease cars consecutively, monthly payments will go on forever. Over a long time, the cheapest way to drive is to invest in a car and keep it until it’s uneconomical to repair further.

Lease contracts usually specify a limited number of miles and if you go over that limit, you’ll have to shell out for an excess mileage penalty.

With a couple of exceptions, like professional window tinting, you will need to bring back the car in its ‘as it left the showroom’ condition, minus the usual wear and tear, and configured just as it was when you leased it.

You’ll still be on the hook for expendable items like tires, which can be expensive to replace on a better-equipped vehicle with more premium wheels.