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Lease vs. Buy a Car

A directions pole that illustrates the differences between leasing a car and buying a car.

If you’re one of those drivers who have never done it, but wonder if leasing a car makes more sense than buying, you may be disappointed. That’s because there are several good reasons for both. And, depending on your driving habits, length of commute, along with other factors, you may want to approach your final decision with as much information as you would when shopping for auto insurance.

Some people are okay with always having a car payment – because they trade in their vehicles often or they tend to finance with long-term loans. For them – leasing is a good choice. But, there’s more to it than that.

In fact, new-car shoppers are divided into two categories with strong opinions: those who buy and those who lease. Most buyers like the peace of mind that comes with owning their vehicle. They know that if they pay cash or hold on to the car past the payoff date of the loan, they’ll most likely come out ahead financially.

The counter argument to that might be you’ll be on the hook for repairs once the factory or extended warranty expires. But, logically, whatever needs repair or replacement will undoubtedly cost you less every year than a seemingly endless string of car payments.

Meanwhile, supporters of leasing enjoy the flexibility to trade up to a brand new vehicle when they get bored with the one they have. In 2014, more than one-fourth of new-car transactions were leases, and the percentage appears to be rising. According to Matt Jones, of, the new generation of shoppers isn’t as invested in the idea of personal ownership.

Another strong case for leasing is that you’re paying for a vehicle’s depreciation only over the term of the lease and your payments are likely to be lower than if you financed the entire cost. The majority of dealership leases are written for a term of three years, which means the leased vehicle is almost always under warranty.

An example of how buying could cost you money would be if you purchase a 2015 Chevrolet Malibu 1LT listing at $24,560 with a 60-month loan and 10% down at Chevy’s 2.9% financing. Your payments on the Malibu will be $396 a month. Now, should you feel the urge to trade in the car at the end of three years, according to Kelley Blue Book’s estimated resale value, you’ll probably get around 50% of the original sticker price, or $12,280. In the end – your total out-of-pocket cost at trade-in will be about $13,290.

However, with today’s attractive low lease options, you can lease the same Malibu for $179 a month for three years with $1,209 down. Your overall cost will be about $8,650 over three years, which includes the fees leasing companies typically impose – such as a front-end acquisition fee ($600 to $800) and a back-end disposition fee (about $350). In this case, leasing would leave more than $4,600 in your pocket over buying.

But, the advantage can easily tilt in favor of buying at times when a certain type of vehicle has a higher-than-average resale value, which will result in you getting more at the time of trade-in.

There are additional things to consider before leasing. For instance, excessive wear and tear could cost you. Although leasing companies usually won’t dock you for surface scratches or a less-than-perfect interior, they may charge you for dents or other visible proof of abuse or neglect. In addition, mileage is typically capped at 12,000 to 15,000 miles per year with as much as 20 cents per extra mile at the end of the lease. So, if you intend to commute long distances or use the vehicle for work, you may want to consider buying instead of leasing.

Furthermore, an early-termination fee will likely be in effect should you want to get out of the lease. But, a dealer may allow you to take advantage of a “pull-ahead program,” which lets you return your current vehicle to the dealership and lease a new car, quite often at more-favorable terms.

Regardless of what side of the “buying vs leasing” fence you’re on, you need auto insurance to drive your new ride off the lot. And, getting the best auto insurance rates to protect your vehicle can save you a great deal of money over the course of your lease or loan. Why not get a free auto insurance quote comparison online or over the phone at 800-777-5620 today?

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