Are you considering a new car but unsure whether to buy or lease? Each option has its own pros and cons, so take time to assess your needs, financial situation, and future before deciding. Ultimately, the right choice depends on your budget, driving habits, and how long you plan to keep your next car.
Buying a car
Unless you have the money to buy a car outright, most people who make the sizable purchase take out an auto loan with a bank, credit union, or another lender. Monthly payments are made for a set period, and each month, a part of the payment is applied to the loan’s interest, while the rest is applied to the principal. Once the car loan is paid off, you get the car title and own it. Some pros and cons to buying a car include:
| Buying a car pros | Buying a car cons |
| You ultimately own the car outright and can keep it as long as you want. |
Buying outright requires cash up front and potential monthly financing. |
| Buying usually saves you money if you keep the car for years after it is paid off. |
You pay for all maintenance and repairs. |
| You’re free to use, insure, sell, or upgrade the car however you like. |
A car loses value over time. |
| There are no mileage limits or extra wear-and-tear fees. | Selling or trading in your old car can be slow and may not get you full value. |
| Loan terms can be stretched 3-7 years. | Money spent on a car could be used elsewhere. |
Leasing a car
A car lease is an agreement that lets you drive a new car for a set time, usually a few years, while making monthly payments. When leasing, you don’t own the car; you’re just renting it from the dealership or leasing company. At the end of the lease, you usually return the car, though you may have the option to buy it. There are some pros and cons to leasing a car:
| Leasing a car pros | Leasing a car cons |
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Monthly lease payments are usually lower than a car payment. |
Leases include annual mileage limits, and exceeding them may result in expensive penalties. |
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Leases often require little or no down payment. |
You can’t customize or modify the car because you don’t own it. |
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Leasing lets you get a new car every few years with the latest features. |
You may pay for extra wear and tear when you return the car. |
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With short-term leases, repairs are usually covered by warranty. |
Ending a lease early can result in substantial penalties. |
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Leasing protects you against the car’s depreciation. |
Leases may require more expensive auto insurance. |
If you are thinking about leasing a vehicle, keep in mind that your auto insurance premium may increase. This is because leasing companies often require higher coverage levels to protect their investment in the vehicle. As a result, leasing can lead to higher insurance premiums than purchasing a car outright, where minimum coverage requirements may be lower.
Regardless of whether you buy a new car or lease, it’s a good idea to review your auto policy to ensure you always have the right insurance coverage suited to your individual needs. And if you’re not yet insured with Mapfre and live in Massachusetts, you can always get a fast, free quote on your car insurance policy by contacting an independent agent in your state.
