Leasing vs. Buying a Car

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - March 16, 2018

Choosing to lease or buy a new car can be a challenge. Both come with benefits and drawbacks that depend on different aspects of the borrower’s credit and financial situation.

Leasing a Car

When a borrower leases, they never have ownership of the vehicle. They only make payments for the lease term and return the car at lease end, although they have the option to purchase it for an amount that’s determined when taking delivery. A big benefit to leasing is not worrying about the vehicle’s depreciation. Because the lessee doesn’t own the car, depreciation won’t put them at risk as a result of negative equity. Also, monthly payments are generally lower on a lease, but the lessee will find it difficult to end the lease early. If they choose to do so, there may be costly charges.

Leased vehicles come with a set amount of miles to be driven, and this is one of the biggest downsides to leasing. If the buyer anticipates driving more than the given mileage, they can purchase more miles up front. Turning in a lease over mileage can be very costly. However, if the lessee purchases extra miles and ends up driving under the limit, those miles won’t be refunded. The lessee also needs to be extra cautious of wear and tear on the vehicle because they could be charged for having what the lessor considers “excessive” wear and tear.

Buying a Car

Purchasing a car means the borrower can drive as many miles as they want, customize the car, and keep it as long as they desire. Because the car is theirs, the borrower can also repair any wear and tear items on their terms. The borrower’s monthly payments may be higher when purchasing a car compared to leasing because the total purchase price has to be paid off during the loan term. Depending on the borrower’s credit score, the interest rate could also be higher.

While the borrower doesn’t have to worry about keeping the car under a certain mileage or excessive wear and tear, the lingering thought of depreciation and the money invested in the car will always be present. If the borrower has plans to use the vehicle as a trade-in or sell it privately, they’ll need to know how much value the car will lose over time. The first year of ownership is when the biggest depreciation drop occurs (typically around a 20 percent decrease in value), and the best way to decrease the impact of depreciation is with a down payment. The higher the down payment is, the narrower the difference between the car’s value and the loan balance.

Leasing and Buying with Bad Credit

When it comes down to picking to lease or buy with bad credit, your best bet is to take out a subprime auto loan and purchase a vehicle. Most lenders won’t approve you for a lease with bad credit, and it’ll be much easier to get approved for an auto loan.

If you’re looking for a local dealer to work with for buying your next car, CarsDirect wants to help. We work with an extensive network of special finance dealers that have lending resources available to assist people in many challenging credit situations. Take the first step by filling out our no-obligation online auto loan request form. Get started today!


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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