Car Buying Basics: Buy or Lease?

Home > Affinity Member Connections

800.325.0808 Contact a Representative

For as long as she can remember, Ann has dreamed of driving around town in a sleek new BMW, but because her budget is more accommodating to a Honda Civic, she's resisted the urge to trade up. That is, until she sees an ad for leasing her dream car - for nearly the same monthly payment as her current vehicle. Now Ann wonders, is this the right time to take the plunge?

Deciding whether to buy or lease a car can be complicated and rife with emotion. Most experts caution against leasing, but both options have advantages and drawbacks. The chart below breaks down the pros and cons of leasing to help make the decision a little less emotional, and a lot more logical.

What to Do?

A low-interest rate auto loan can help you afford to buy a car instead of lease. "Leasing a vehicle can be convenient, but that convenience comes with a price," says Johana Gomera, Consumer Loan Manager, Affinity Federal Credit Union. "Buying a car gives you the chance to build equity and avoid the endless cycle of car payments, mileage limits and wear-and-tear penalties that leasing imposes."

The Pros of Leasing	The Cons of Leasing
Low monthly payments. Lease payments are based on only the depreciated value of the car rather than the entire cost, and the resulting lower monthly payments could potentially help improve your cash flow. Many leases also allow lower down payments than purchases.	Nothing to show for your payments. "If you lease instead of buy, you won't own the car at the end of the term," explains Johana. "After the lease is up, you must either give the vehicle back to the dealership and arrange a new lease, or finance the residual value." When you buy a vehicle, on the other hand, you can use the value of that car toward the purchase of your next car.
Easy turnover. There's no need to hassle with selling your car or negotiating a trade-in value when you're ready to move on. At the end of the lease, you just hand over the keys to the dealer.	No flexibility. Leases often include stiff penalties for cancelling the arrangement early. For example, if you need to move or switch to a minivan to accommodate more children, you could end up paying as much as six extra months of payments.
The opportunity to drive a newer car. Every three years or so you can upgrade to a vehicle with the latest technology, safety features and creature comforts.	Potential for big fees. Most leases charge you extra for every mile you drive over a certain limit (typically 12,000 to 15,000 miles per year). "There can also be penalties for damage beyond simple wear and tear, and you may need to purchase GAP coverage in addition to comprehensive and collision insurance," Johana cautions.

Learn more about auto financing options from Affinity, call 800.325.0808 or stop in to see us. We can help you run the numbers and decide how to finance the car of your dreams.