Should You Buy a Car — Or Lease One?
When I moved to Los Angeles from New York, I hadn’t driven a car in ten years. In New York, I could rely on the great public transportation to get around, but L.A. is much more spread out. I knew I needed a car, but I didn’t know if I should buy a new one, buy a used one, or lease a car. It turns out there’s no easy answer. Each method of acquiring a car has advantages and disadvantages.
Whether you’re buying a car for the first time, or trading one in, there are plenty of things to consider before you decide if buying or leasing is right for you. Here are a few things I’ve learned about car shopping:
BUYING A NEW CAR
If you don’t trust yourself to negotiate a good price on a new car, don’t worry — lots of dealerships now offer fixed car prices, so there’s no haggling necessary. If you’re planning to visit a dealer that doesn’t offer fixed pricing, research prices online before you go, so you know a fair price for the cars you like. This Edmunds calculator can help you determine how much you can afford to spend. Buying a new car may feel extravagant (It’s true that a car loses value the moment you drive it off the lot), but a shiny new vehicle is also less likely to have any major mechanical problems for a few years.
More things to think about:
- If you take out a car loan, your lender may require a large down payment.
- Your monthly payments for buying a car will be higher than lease payments (but in the end, you own the car).
- When you buy a car, you don’t have to worry about the mileage restrictions of leasing. You can take all the road trips you want.
- If something goes wrong while the car is new, the repairs are probably under warranty. (Yay!)
- Once the car is paid off, your monthly payments are over. You will have more maintenance costs as the car ages, but if you plan to keep your car for many years, buying is usually cheaper than leasing.
- When you want a new car, you’ll have to deal with selling (or trading in) your old one.
BUYING A USED CAR
The main reason to buy a used car is that it’ll be cheaper than buying a similar, brand new, model. Other expenses of car ownership, like car insurance and registration fees, will also be lower, because they are based on the current value of the car. Maintenance costs, on the other hand, may be higher. Older cars tend to have more problems.
Before you buy a used car, keep these things in mind:
- Know how much you can afford to spend. Some dealerships may offer used car financing, but if you’re buying a car from an individual, they’ll probably want cash up front.
- You are responsible for researching the car’s history. If you’re buying a car from a stranger, make sure you get a vehicle history report. Used car purchases are typically “as-is.” (You may also consider buying a certified pre-owned car which comes with a warranty.)
- Comparing prices can be trickier when buying a used car, because no two cars are used in the same way. Some may have much higher mileage, and some drivers are harder on their cars than others.
- When you find a car you like, bring it to a mechanic you trust for an inspection. This may cost a few bucks, but if it alerts you to problems you aren’t aware of, it’ll definitely be worth it in the long run.
- It’s up to you to make sure the paperwork transferring the car’s ownership is completed correctly. The rules are different in each state.
LEASING A CAR
When you lease a car, your monthly payments will usually be quite a bit lower than if you’d bought (and financed) a new car. When the lease ends in two or three years, you can sign a new lease and drive a new car. That means you’ll always have access to the newest technology and the most advanced safety features — but as long as you’re leasing, you’ll have to keep making monthly payments. This calculator can show you how much those monthly payments will be.
Other things to consider about leasing:
- You have to turn the car back in at the end of the lease, even if you love it and gave it a nickname. You won’t own it. (But some dealers give you the option to buy your leased car from them!)
- If you’re hard on the inside or outside of your car, you may have to pay wear-and-tear fees at the end of the lease.
- Your mileage is limited (typically, you can’t go over 12,000 or 15,000 miles a year, or you’ll have to pay fees.) If you drive a lot, those over-mileage fees can really add up.
- Your car will always be under warranty, so you’ll have lower repair costs.
- You’ll pay less sales tax, since you’re not buying the car.
- When your lease is up, you don’t have to deal with selling the car. That’s the dealer’s problem.
- If you have to terminate the lease early, it can be very expensive. You may even have to make the remaining payments.
Whether you decide to buy new, buy used, or lease, make sure you test drive a few different cars, so you have a sense of what feels “right” for your body and your driving style. I decided to buy a new Smart car, because I thought it would be fun to drive (it is!). I also like that it’s easy to park, because I’m not very good at parallel parking, and parking skills are essential in Los Angeles. I’ve been happy with my choice, but my friends who’ve chosen to lease cars or buy used cars are just as happy with their decisions.
Do whatever makes YOUR heart (and your bank account) happy.