Inspired by our Driving-Inspired Style Guide, we asked our expert to tell us everything we should know about purchasing, financing and leasing.
Making a decision about getting a new car often begins with a budget.
If you have some money socked away and you don’t want to make car payments, you should purchase a vehicle. This means you buy a vehicle with money that you have: you pay for it up front and it’s yours.
Pros of purchasing
- No car payments.
- No borrowing money to pay for the vehicle.
- Keeping the vehicle as long as you want.
Cons of purchasing
- No fresh new vehicle every few years (as with leasing).
- You are responsible for any maintenance and upkeep outside of the warranty.
If you don’t have money socked away, or if you do but it isn’t enough to pay for a new vehicle, you can look to borrow (or finance) a portion of the cost of the vehicle. This means you borrow money from a bank, the dealership, or another lending institution.
Pros of financing
- You can get a vehicle even if you have very little cash,
- Even if you have cash, you can get a more expensive vehicle if you’re willing to keep up with monthly payments and can afford them.
- Once you pay off the loan, the vehicle is yours.
Cons of financing
- You might not be approved for financing if your credit is not good.
- You might be tempted to get a vehicle that's more expensive than you can afford, and you have to keep up with monthly payments.
Leasing a vehicle means that you use a vehicle for a predetermined amount of time and return it when the leasing term is up. To lease a vehicle, you put a certain amount of money down and then pay a certain amount of money per month. At the end of the leasing term, you return the vehicle or you can choose to buy it.
Pros of leasing
- Lower down payment and monthly payments than financing, and you only pay tax on the period of time you use the vehicle, not the whole amount.
- You can use a vehicle for a certain period of time and not worry about having to sell it when you’re finished with it.
- If you like having new vehicles all the time, leasing enables this with less hassle.
- Maintenance is likely part of the package; be sure to ask before you lease.
Cons of leasing
- You have to keep up with monthly car payments.
- Because of the way leasing works, you pay for the most expensive period of a car’s lifespan (36-48 months).
- You have to agree to stay within a predetermined number of miles. If you go over that amount, you will likely have to pay a fee.
- Ending the lease early may result in a fee.
As usual when you’re spending a large chunk of change, be sure to do the math and ask questions when you’re not sure about something during the purchasing process. Don't be afraid to walk away.
Sara Lacey spends her time punishing automobiles with the help of her children so you don't have to. Her expertise cuts through the monotony of torque and displacement and gets right to the things important to every mom: cup holders and latch connectors. Sara writes about cars for MotherProof.com & Cars.com. She sits on the board of theRocky Mountain Automotive Press Association.
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