Lease vs Buy: Which is Best for My First Car

First time auto buyers have a lot to consider when deciding whether to lease a brand-new car or buy an affordable vehicle they will someday own. While leasing may offer a newer, fancier car with lower monthly payments; obtaining a car loan and buying your first car you will someday hold the title to is very (financially) appealing.

Lease vs Buy: Which is Best for a First Time Auto Buyer?

When it comes to determining whether you should consider lease vs buy for your first car, it is first important to know a few facts about each so that you can make an educated decision about what’s best for your unique situation.

The Difference Between Leasing and Buying a Car

• Leasing a Car – Those who decide to lease a vehicle vs buying a vehicle are basically paying the depreciation of the car for a pre-determined amount of time. You will not ever own the car outright, but you can get a new one when the lease term matures with no worry of having to sell it. Typical lease payments average around $450 a month with usual terms of 36 months.
  
  
• Buying a Car – Those who decide to buy a vehicle vs leasing a vehicle can do so at an auto dealership, from a friend, from an advertised seller, or even at a car auction. If you have saved enough, you can pay cash for the car, or you also have the option of working with an experienced lender to obtain a car loan to buy the vehicle. The average used car loan is around $20k with a monthly payment of $400, while a new car loan is about $45k with a monthly payment of around $575

Leasing vs Buying a Car: Things to Keep in Mind When Comparing Both Options

There are many differences when it comes to leasing vs buying a car for the first-time auto buyer. It is important to know some of the good and bad points about each to ensure you make a smart decision. From ownership, up-front costs, and monthly payments to financing options, and early termination, here are some pros and cons to consider for each option when car shopping.

Pros and Cons of Buying My First Car

Pros of Buying a Car

• Generally speaking, when buying your first car, the payments you make each month go toward building equity until you pay off the car loan and own the vehicle
• Drive anywhere you want and enjoy the benefit of unlimited miles without penalties when you own a car vs leasing it
• When you decide you no longer want the car, you can trade it in at your auto dealership for cash or it can be sold anytime you wish
• Up-front costs are typically lower than leasing a car and you save on security deposits, acquisition fees, and more.

Cons of Buying a Car

• Buyers may see a rapid depreciation on their vehicle
• Monthly payments are typically higher than leasing because you have a large, set balance to pay off versus lease payments that end when your lease expires
• Since first time auto buyers do not often have credit established, interest rates are typically higher.
• Any maintenance and repairs that are not covered by a warranty or sales agreement are the responsibility of the car owner

Pros and Cons of Leasing My First Car

Pros of Leasing a Car

• Some vehicle leases include oil changes and other routine maintenance saving you money on scheduled maintenance fees
• When leasing a vehicle vs buying a vehicle, you always get to drive a newer model car
• Leasing typically offers lower monthly payments than buying, giving you a newer car for less money

Cons of Leasing a Car

• There are often fees due when you return the vehicle when the lease matures
• All money paid via monthly payments equal no equity in the vehicle and is simply a rental fee for its use
• Lease contracts limit the number of miles allowed, with mileage penalties if you go over
• Leases can sometimes be difficult to get out of if you change your mind which may include early termination penalties and/or fees

While both leasing and buying a car have their own set of pros and cons, both are great options for first time auto buyers, and research is suggested when lease vs buy car decisions are being discussed.