Two of the least expensive ways to get a car are buying a pre-owned model or leasing a new one. Naturally, there are advantages and disadvantages to each approach. Below, we’ll take a look at the pros and cons of both strategies to help you determine whether you should you buy a used car or lease a new one.
Buying Used Advantages
Right off the top, you’ll bypass that initial depreciation hit all new cars take the moment they’re driven off the dealer’s lot. A three-year old car usually costs about half what its new counterpart goes for. Even better, with most manufacturers on five- to seven-year replacement cycles, you can have a lot of the latest tech for half the cost.
Older cars cost less to insure as well. Plus, given the lower value of the car, you might even elect lower levels of coverage — or higher deductibles for collision and or comprehensive policies to bring the cost down even more.
Unless you’re extremely particular, buying a used car comes with fewer worries about its appearance. After all, we’re talking three-year old car here, so you’re less likely to be obsessed with keeping it absolutely pristine. Yes, you’ll want it to look as good as possible, but — for many people — it’s easier to accept a door ding in your used car than your new one.
Today’s cars can easily go a hundred thousand miles or more, if you give them what they need when they need it. In other words, maintained reasonably, you can realistically expect to get a lot of use out of a car these days.
You’ll have the entire spectrum of new cars from which to choose, so you can get the exact color you want, the exact options you want and pretty much everything else your budget will allow. You want electric green paint and a purple interior? You can have it if the manufacturer offers it.
You’ll pay less to get into a lease vs a buy. If you’re looking at buying a three-year old version of a car or leasing the exact same vehicle of the current model year, you can almost always get into the leased vehicle for less money. In most cases, you’ll need to come up with 20 percent of the sale price to finance a used car at a good interest rate. The threshold for acquiring a lease is much lower and your monthly payments are likely to be less too. Even better, those lease payments are likely to be tax-deductible if you use the car for business.
Maintenance and repair worries typically fall by the wayside as well. Many manufacturers are including basic maintenance in the price of the car nowadays, so you can just take it in for oil changes and the like at no charge. Further, if you set your lease to coincide with the duration of the warranty, the manufacturer will cover repairs for the entire period of your lease.
Buying Used Disadvantages
You’ll be at the mercy of the marketplace in terms of finding exactly what you want. In fact, you’ll wind up compromising on some aspect of the car in most cases. You will also incur maintenance and repair costs. Depending upon the reliability of the model you select, this can sometimes be a rather costly aspect of buying a used car. You’ll likely sacrifice some new features too, as cars tend to evolve year over year these days.
While your monthly payments are lower and your down payment is less, you’ll be paying for that car every month you drive it. What’s more, you’ll repeat the process every three years. In other words, you’ll make perpetual payments when you lease serially. You’ll also pay more for insurance, as the leasing company will want you to maintain full coverage and highest liability protections.
Another consideration is the fact you’ll be limited to driving 12,000 miles per year. This can be even lower with luxury cars. You’ll pay $.25 per mile in addition to your agreed-upon payments if you go over. Along these same lines, you’ll be expected to maintain the car and its appearance in tip-top condition.
So, with all of this in mind, should you buy a used car or lease a new one? Which approach makes the most sense for your situation, circumstances and needs? Well, that’s a question only you can answer.