Should I buy or lease a car? My thought process to decide.

I’ve been in the fortunate position of owning and leasing several cars throughout my life. In high school I owned a new minivan, in college I leased a few sedans, and now I own a used station wagon. I’ve learned all kinds of things about the car buying process (shout-out to our car buying guide for putting everything you need for the car buying process into one amazing resource), but I’ve also learned that car ownership isn’t one-size-fits-all. There can be a lot of overwhelming factors when you’re looking to add a car to your life, and I’m here to help you with the most basic question: what kind of purchase and commitment are you even looking to make?

When you think of buying a car, most people picture financing a fresh-from-the-factory model with every modern feature (and a price tag to match!). If you’re not looking for every single innovation a car currently has to offer, maybe it’s worth considering purchasing an older model year. OR if you’re not looking to keep your ride for the long-haul, consider a lease. See? You’ve got options! Let’s break it down even further.

When should you purchase a new car?

When considering whether to buy or lease a car, it's important to evaluate your specific needs and financial situation. For instance, if you prefer a new vehicle every few years and want to avoid the hassle of selling or trading in, leasing might be a more appealing option. However, if you're looking for long-term value and ownership, buying a car outright could be more beneficial. Interestingly, my decision-making process also took a turn when I explored the idea of purchasing a motorcycle. To ensure a smooth transaction, I found using a motorcycle bill of sale template to be invaluable. This template not only provided a clear record of the sale but also helped in understanding the legal aspects of vehicle ownership, which is crucial whether you're buying or leasing a car.

I inherited the new minivan I drove during my high school days (affectionately referred to as the mom-mobile) because my mom couldn’t stand driving it every day. Feel free to roast me in the comments for my privilege. She thought it made her look too old. I was excited for all the swanky features, and to be a sixteen year old with a new car. To be honest I didn’t put a whole lot of thought into why owning a new car was a big deal. Oh, to be a teenager again.

But here’s the reality: do you want to drive your car for decades, or until the wheels literally fall off? Then a new car might be your perfect match.

A brand-new car is a match made in heaven for someone who wants to keep their car around forever. If you’re the only owner, you’ll know exactly where the car has been and what maintenance has been performed.

Another scenario where a new car is a good option is when the interest rates on loans are low. You’re likely to get a better deal on a new car than a used one when interest rates are low. If your monthly payment is at the forefront of your mind, which it probably should be, this is a solid argument for a new car... or, you could put your teenager on the title of a new car because it makes you feel old. I know that having a car helped me hold down several jobs I wouldn’t have been able to without transportation before I could afford my own car payment!

When should you purchase a used car?

I purchased my current used car because they no longer produce new models with the features I was looking for. I wanted a diesel with tons of storage, but not a truck, which left me with slim options. If you don’t have a limiting factor like I did, you may have a harder time making the choice.

If you’re facing unlimited options, a good reason for owning a used car is the big bad “d-word”... depreciation. The second your car leaves the lot, it loses value. If you’re more concerned with the overall value of your vehicle than the bells and whistles, you are a perfect match for a used car. Since you’ll be spending less on the car in the first place, you’ll lose less money in the long run.

Buying a used car from a private party can translate to even more savings, because there’s no sales tax. Also, you would be letting the original owner take the initial hit in terms of depreciation when the car leaves the lot.

Additionally, if you’re hard on your vehicles (to put it delicately), then owning a used car might be just the thing. I’m not saying I’ve backed my car into a tree, but I will say that if I did, I wouldn’t feel too badly because I own it, and it’s already well-loved anyway. So, if offroading is your jam consider that wear and tear when making your car purchasing decision.    

When should you lease a car?

Listen, people in the FIRE community will often try to scare you away from leasing cars. It’s not always the most efficient way to spend your money, BUT there are some major pluses that people seem to skip over. As a person who leased two cars back-to-back, I have no regrets at all. Leasing allowed me to be indecisive but still have a car to get me around town until I really narrowed down what I was looking for in my forever car.

One perfect scenario for car leasing is if you’re working with a very limited budget. Depending on what kind of car you lease, the payments are typically much lower than if you bought the car outright. If you’ve only got enough saved up to purchase a beater car, you’re in luck! You can use that chunk of money for a downpayment on a leased vehicle, and then all the worry about maintaining a clunker goes out the window.

Speaking of maintenance, I fully blew the speaker system in my leased car and I was able to drive the car to the dealership and have the speakers fixed for no cost to me. If you’re looking to be hands-off about upgrades and maintenance, go with a leased car. I truly miss driving my car into the service bay and leaving without paying a dime. Since the dealership still technically owns your car, it’s in their best interest to keep it driving well.  

Where do you go from here?

Run, don’t walk, to our car buying guide. Seriously. This is just the tip of the iceberg when it comes to purchasing your next vehicle. Now that you’ve assessed your needs when it comes to the kind of car you’re looking for, you’re going to need to know the next steps in the process. Whether you purchase new or used, or lease your car, you deserve to make the most informed decision possible.

Don’t forget to share your purchases with me in the comments! I’ll gladly share photos of my precious wagon with you in return.