advice hub

Should You Buy or Lease Your Next Car?

Know the facts about buying and leasing a new vehicle

Deciding on a new car is a big decision, and so is how you pay for it. Before you stop by your local dealership or start dreaming about custom options, first consider the pros and cons of buying or leasing your new ride. Check out these comparisons and determine the right road for you.

When to Buy

If you like having ownership of your car and don’t want to worry about mileage limits or meeting specific up-keep standards, buying your next vehicle is probably the right option for you.

When buying a car, you can either pay cash or take out a loan with your bank or credit union, or even the dealership, and make monthly payments over three to six years until the balance is paid in full.

Here are some other points to look at before making a purchase:

Buying Pros

  • Serves long-term needs
  • Great for high-mileage drivers
  • Modify the vehicle as you please
  • Multiple finance options
  • Loan can be paid off and monthly payment eliminated until next purchase
  • Insurance costs can decrease as vehicle ages

Buying Cons

  • Responsible for all repairs and maintenance
  • Value depreciates over time and varies based on condition, mileage and other factors
  • Typically takes three to six years to pay off
  • Must wait to experience latest features introduced on newer models

When to Lease

If you enjoy getting behind the wheel of a new car and experiencing the latest designs and features from auto manufacturers, leasing your next vehicle might be one of the first ‘pros’ you should consider.

When you lease a car, you aren’t purchasing with the expectation to own it, but rather signing a contract agreement with the dealership acknowledging that you will return it in good condition at the end of the term. Think of it as a really long car rental.

Here are some other points to look at before signing a lease agreement:

Leasing Pros

  • Brand new car
  • Short-term needs
  • Limited maintenance
  • Under factory warranty
  • Little or no down payment required
  • Generally low monthly payments
  • Fits easily into a monthly budget

Leasing Cons

  • Leasing fees including security deposit and early termination fee
  • Must follow dealership rules regarding mileage, repairs, and liabilities
  • Limited customization or modifications
  • Mileage limits typically at 12,000 per year
  • No payoff option (always need to make a payment)
  • Not all banks or credit unions provide leasing finance options

Bottom Line

Choosing the right financing option is just as important as finding a car that meets your needs. Be sure to consult with your financial institution about loan rates and terms, or if they provide leasing finance options. Whether you choose to buy or lease, you’ll want to make sure you know how much car you can afford as part of your monthly budget. Use one of United’s calculators to help give you a good idea on where to start.