A third option, rather than buying used or buying new, is to lease a new car.
The biggest benefit to leasing rather than buying is that you can get more car for your dollar. When you lease, you don’t pay on the full purchase price of the car, rather, you pay on the depreciation of the car. This means if you lease a $25,000 car for 3 years, and the anticipated value of the car at the end of the 3 years is $15,000, you only make payments on that $10,000 difference. If you had purchased the car, you would make payments on $25,000.
If you do not have a lot of money for a downpayment on a car, leasing can also be a beneficial options. When buying a car, it is good to put down 10-20 percent of the purchase price. Leasing, however, is often available with no money down or as little as $1,000 down.
The main benefit of leasing is obvious: you get to drive a brand new car every 3 years! The drawback, however, is that the money you are spending isn’t investing in an asset, it’s simply spending money. Like renting instead of buying, you are not purchasing any equity in an asset you can later sell.
Other considerations are mileage fees and potential damage to the vehicle. If the car is damaged or you drive it over the mileage limit, you may end up with hefty fees.
Leasing often costs more than buying in the long run, as you’ll probably keep driving a purchased car for longer than 3 years.
Financially, buying a reliable used car is typically the wisest option. However, buying or leasing a new car can have other benefits. Whichever you choose, be sure to budget wisely and leave room for unexpected repairs, maintenance, and other costs associated with operating a vehicle.