The process of getting a new car involves making a big financial decision that’s worth thinking through carefully. When you’re looking into getting a new vehicle, one of the first things you’ll need to decide is if you want to buy or lease. While each option has its own benefits, it will be important to keep your situation in mind and what exactly you’re wanting from your new car.
If the leasing versus buying debate is playing out in your head, we’re here to help you make this decision. Read on to find out which factors will help you know whether to lease or buy your new car – plus a few useful resources and tools!
Factors to consider
Just like with any financial decision, there are several factors to consider when thinking about leasing versus buying a car. The most important one is what you’re looking for in a car. Are you really into the newest technology and safety features? Are you more interested in getting something you can call yours that you can keep around for a kid to drive as their first car? Is affordability something you’re really going to have to focus on?
Your answers to these questions will be telling to whether or not buying or leasing is a smarter choice for you. Additionally, think about whether you’ll qualify for financing a car, and if you have enough for a down payment or if your credit score is strong enough to qualify for a car lease program. Between leasing and buying, there’s an option for every preference and financial situation.
Leasing
Leasing a car involves paying to be able to drive a car for a set amount of time. You don’t own the car, you just pay to drive it until the lease ends. Then you can lease another car, and so on. There are certain terms and conditions to consider with leasing, like mileage restrictions and fees for wear/damage on the car.
This may be a strong option if you want to constantly drive a new car and have the freedom to switch it up quite often. Or maybe you’re just not sure what type of car you want to commit to, so you may want to lease a few choices to get a good idea of what you’ll want for the long term. If having low monthly payments is your main concern, you may be happy to know that leasing usually offers lower monthly payments than buying. So, if you’re okay with not eventually owning the car, leasing may be the way to go.
If you decide you want to lease a car, you’ll need to first look at your budget and potentially talk to a trusted financial advisor to see what kind of car you can afford to lease. When you get to the point of leasing the car, you’ll need to do that through a car dealership or a car leasing company. They will go over all the options and details with you, and then you can decide what your best option is.
Leasing is great for:
- People who love variety and want to switch their cars often
- People who want a lower monthly payment than if they bought a brand-new car
- People who are living somewhere only temporarily (<2 years)
- People who are undecided as to the car they want to buy and want to try a few options
If you:
- Have enough money to put down a deposit for the vehicle
- Have a good enough credit score (often scores over 700 are ideal for car leases)
Additionally, most car lease contracts are negotiable. So, make sure you do your research on what standard lease terms are for the car you’re looking to lease and shop around till you find something in your budget.
Buying
Most of the time, choosing to purchase a car involves getting an auto loan. Unless you have the full amount for the car in cash, which still may not be the best idea when there are payment plans available. With an auto loan, you often have an up-front down payment and then make monthly payments (including some interest) to gradually pay for the car. When you’ve fully paid off the car it will officially be yours.
This is the preferred option for drivers who want to fully own their vehicle, and don’t plan on switching to the next car too often. Getting a loan is also a great option for those who are looking to buy an older car, which will give you a lower monthly payment than with a brand new car. So if affordability is a main factor for you, buying a car that’s older may be the way to go, even if it’s just a few years behind the newest release.
Buying is great for:
- People who want to save money from owning their car long-term
- People who are confident about the model and brand of car that they want
- People who want older cars that you can’t get through a lease program
- People who don’t always need the latest and greatest features and can allow their car to be a few years old before getting a new one
If you:
- Have the money to either pay a larger up-front sum or higher (than leasing) monthly payments for a zero-money down vehicle purchase
- Have the credit score to qualify for an auto loan or enough money to buy the car outright
- Plan to buy the car outright and want to save on paying interest from auto loans or fees from vehicle leasing
If you’ve decided that getting a loan to purchase a car is what you want to do, the next step is to talk with a loan officer at a trusted bank. For more information about how getting an auto loan works, visit our previous blog post, Auto Loans 101: What You Need To Know.
Leasing versus buying a car
| Leasing | Buying |
| Lower monthly payment than buying | Higher monthly payment (can get a lower monthly payment if you buy an older car) |
| Outcome is a lot of experience with different cars | Outcome is fully owning the car |
| Mileage restrictions, charges for wear and tear on the car | No restrictions or charges for wear and tear |
| Flexible in terms of being able drive different cars and not committed to one | Committed to one car that you’re working to pay off |
| Usually no down payment required | Down payment required up front (the larger the better since you won’t pay interest on it) |
| Won’t deal with much maintenance costs as the car ages since you’ll be driving newer cars | Will have to handle maintenance costs as the car ages |
Key resources and tools
If an auto loan is what you decide on, Hickory Point Bank is here to be your trusted source of information and excellent service. Take our One Minute Auto Loan Test to get an idea of what kind of loan you could qualify for.
Need to just play around with some numbers and see what different monthly payments or loan amounts would look like? Visit our calculators page where you’ll find three helpful auto loan calculators: Auto Loans calculator, Home Equity Versus Auto Loan calculator, and the Lease Versus Buy calculator. The Lease Versus Buy Calculator will help you make sure you’re choosing the right option for you.
Learn more about Hickory Point Bank’s auto loan offerings and even apply online here. Or if you’d rather speak to one of our loan officers, call or visit us today!
Whether you ultimately decide to lease or buy a car, the important part is making sure your decision is informed by a trusted source. And if you are looking to take out an auto loan, visit Hickory Point Bank online or in one of our several locations across central Illinois. We would love to help you in your auto loan journey!
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