Am I the only one who has noticed more people talking about leasing cars? I was scrolling Instagram last week and saw a video of an interview with Matthew Knowles, businessman and entrepreneur. He is pro leasing cars and stated that he has leased different Rolls Royce cars for the past 12 years. On the other side, I just so happen to be pro buying cars, and I have owned my Nissan Altima for 9 years and counting.
I have taken the time to understand both sides and realize there are benefits in both leasing and buying depending on your current situation. Let’s look at some key differences between leasing and buying a car and how each might appeal to a six-figure business man, like Matthew, and the average young adult.
Pros of Leasing
- Cheaper payments — This is probably the most appealing part of leasing a car. Since the payment is up to half the amount of buying a new car, you get the immediate feeling of saving money.
- You get a new car every couple of years — This seems to appeal to many customers. It allows you to keep up with the new cars and their new technology and have a car that is covered under manufacturer warranty.
Cons of Leasing
- Spend more money long term— Consumer Reports has a side-by-side comparison over a 6-year period showing that you actually pay more. Also, if you continue to lease one car to the next, that payment never ends.
- Mileage restrictions — When leasing, you are under the obligations of your contract, which includes a maximum number of miles per year. If you drive over that maximum amount, you’ll pay a fee.
Pros of Buying
- Working towards ownership — Once you get the car paid off, you own it and can eliminate that bill.
- Freedom — Buying a car gives you the freedom to put as many miles on the car as you would like, and if you are interested in customizing the car, you don’t have the same restrictions as you would with leasing the car.
Cons of Buying
- Higher Payments — The monthly payments are higher because you will be paying for the car as well as the accumulated interest.
- Expenses — Once the warranty runs out on the car, you will be responsible for the repairs or mechanical issues that may arise.
The Big Decision
After looking into the differences, I understand why there has been an increased interest in leasing. It definitely gives you some immediate perks. I learned that leasing appeals to businessmen like Matthew because they can write-off car expenses on their taxes and keep a nice newer car for business. On the other hand, having my paid-off Nissan for 9 years has saved me at least $20,000 that I would have been paying out for a newer car. The most important thing is to weigh your pros and cons, and make sure that the choice you make lines up with your personal finance goals.