3 Reasons Financing Your Car Might Be Better Than Leasing

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

We all need a way to get around. Read on to learn why getting an auto loan to buy a car of your own could be superior to leasing one. 

Earlier this year, I took a trip to the U.K. For most of my trip, my host and I got around via public transportation. As an American who lives in an area with subpar public transit options, I was envious. It’s far too likely to be the case that if you live in the U.S., you need to own a vehicle of your own.

Owning a car isn’t cheap. In addition to purchasing the car itself, you’ll have to pay for maintenance and repairs, auto insurance, and registration/taxes owed to your state. And whether your car is electric or gas-powered, you’ll have to pay for fuel (be it by buying gas or the electricity that comes from a charging station).

In fact, you may be considering sidestepping some of these costs and opting to lease a car instead. Here’s why it might make sense to take on an auto loan and just purchase your vehicle.

1. You’ll end up owning the car outright

Despite the many costs that come with owning a car, it’s actually a pretty sweet deal. You build equity in the car as you make payments, and speaking from experience, it’s very exciting to make that final payment. The car becomes yours free and clear, and you can do whatever you want with it. Want to drive for a ride-share service? You can take on that side hustle if you’re financing a car, but may not be able to if you’re leasing one.

If you want to sell it later down the road, you’ll get cash for it — or you could trade it in toward a new vehicle purchase. Want to paint it or otherwise add custom features? Go for it. Leasing a car still has you making monthly payments for it, but you’ll never own it outright, and when you turn it in to the dealer at the end of your lease, you could end up owing surprise fees, or extra money if the car isn’t in pristine condition.

2. You can drive as much as you want

When you lease a car, you’ll get a mileage limit. These can vary, but often range from 10,000-15,000 miles per year. If you exceed your mileage, you’ll be charged perhaps $0.15 to $0.40 per mile. This can add up fast. Buying a car is a better choice if you prefer to be free and unrestricted in how much you can drive. Buying is also a good idea if you don’t know what your future usage of a car will be — perhaps you move often, and may end up farther away from work, adding more miles onto your commute.

3. Buying saves you money over the long term

The best reason to buy a car is if you intend to keep it for a long time, because those higher costs upfront will pay off. I’m still driving the car I bought in 2009. These days, my car spends a lot of time parked in front of my apartment because I work from home and don’t use it daily. But it fits the bill for trips to the grocery store or to hang out with friends locally — and it performed beautifully on the international road trip I took in May.

I haven’t had a car payment in nine years, and my insurance premiums on it are quite reasonable. Because it is so old, weird things have broken on it (for example, the trunk hinges are shot, and you have to be extremely careful to put the trunk all the way open, lest it slam shut on your fingers). But at this point, the car’s idiosyncrasies are part of its charm — and I love not having a car payment.

A few ways to save money on a car purchase

If I’ve convinced you that buying a car is the way to go, here are a few tips to cut your costs:

Buying a used car could save you money, but only if you buy one that is in sound mechanical condition. Get a vehicle history report of any used vehicle you’re considering.Shop around for an auto loan, rather than accepting whatever financing a dealership will offer you. A bank or other financial institution you already do business with likely offers loans, or you can check out our list of the best personal loans.Take on the shortest loan you can afford. Borrowing over a longer period of time means lower payments, but it also could mean you end up owing more on the car than it’s worth.Make a substantial down payment to bring your monthly payments down.Stay up to date on maintenance — this is one of the ways I’ve been able to keep my car for so long.Keep the car for as long as you can. You’ll have to work out your own priorities here, but I’ve heard enough people complain about their car’s key fob, touchscreen, or Bluetooth connection to be thrilled that my elderly car has none of these bells and whistles.

It’s likely that you need a vehicle to get to work, run errands, and complete other perfectly mundane everyday tasks. If you’re torn between financing a car and leasing one, check your own needs and wants against this list — and I know you’ll make the right decision for you.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More