Buying Is Better Than Leasing a Car


The Advantages of Buying Rather than Leasing

Let’s end that argument now. In the majority of cases, buying is the best option.

The main advantage for leasing in the past has been a lower payment. If you expect to hang onto a car for only a few years, leasing will have a lower monthly tab. You also don’t have to worry about depreciation and the trade-in value.

If there isn’t any damage to the car and you haven’t gone over the allotted mileage allowance, you’ll typically sign off and hand in your car keys at the lease end.

For somebody on a budget, they get a brand new car and a monthly payment that will likely be lower than a car loan.

However, beware of the ugly details.

If you go over the allotted mileage, the penalties range from five to 20 cents a mile. Imagine going over 5,000 miles in with a three-year term. You’ll need to cut a check for $1,000 when you turn in your car.

Next comes the scratches and dents and interior issues. If the dealer thinks you have wear and tear above what’s considered normal, they’ll charge you for that, too.

The Best Reasons for Purchasing

If you plan on having the car for more than three years, the reasoning in easy. The credit union always offers excellent rates, lower than what the financing arms of major automakers provide. Check our rates out before shopping. It’s also smart to get pre-approved so you know exactly how much car you can afford.

At the end of a lease, you have nothing to show for the thousands of dollars paid. With buying, eventually you will have paid the car off and no longer have the expense of the monthly payment. You will own a car that has value that can be kept or sold.

Look at The Numbers

Some members like to see the actual numbers. Let’s see what happens with a hypothetical six- year loan vs. a lease.

A 2021 vehicle lease asks for $1,999 down and the monthly payments will be $199 a month for 36 months. That adds up to $9,163 after three years. Imagine you found a similar deal for the next three years. Now you’ll pay $18,326 through six years.

Let’s say the same same hypothetical car had a price of $21,000 and you had to put down $2,000 down. You also financed the car with a 2.50% interest rate for 48 months. That gives you a monthly payment of $413. You will eventually purchase the care for $21,817 after four years. Push that out to six years and you would pay $3,639 a year.

Right now you may be thinking, “I’m saving about $600 a year with a lease. Why buy?

Remember, once the loan is paid off, the car is all yours. The car is worth about $10,000 if you keep it in decent shape. Thus, if you sell the car or use the trade-in value toward your next vehicle, your actual cost of ownership is reduced to approximately $11,800 or $2,000 a year. That’s a savings of almost $1,100 a year and $6,600 over six years.

Is Leasing Ever a Smart Option?


However, here’s the ugly truth: For most people, leasing doesn’t make financial sense. There are some exceptions for business owners or others who can deduct certain vehicle costs. For everyone else, leasing a car should be considered a luxury.

Lease a car if you simply love driving a new car every three years and the cost is worth it to you. As long as you’re aware, it’s fine to make a conscious decision to spend more for your cars than might be necessary.

Your Next Step

PAFCU currently offers car loan rates as low as 1.49% APR. That’s good on vehicles from 2021 to 2018. Our rates are also exceptional for older vehicles. Please contact us today to help you finance your new vehicle. It’s the best choice, by far!

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