Should You Buy or Lease Your Next Car?


Disadvantages of Buying

New cars depreciate the second they roll off the lot. So when you buy a new car, you roll the dice with its resale value. It’s hard to determine what the vehicle will be worth when you’re ready to trade it in or sell it. With leasing, that future value is predicted up front and put in writing on the contract. If your car is worth less than the car loan, you have negative equity (also known as being upside down on the loan). This is only a drawback if you plan on selling or trading it in because you’ll have to come up with the difference between what the car sells for and the amount of money still remaining on the loan.

Chances are you’ll need a sizeable down payment of up to 20% when taking out a car loan, not to mention a solid budget that allows you to comfortably handle monthly payments. Auto loans can last five to seven years. A longer loan term adds to your interest, so you end up paying more for the car than if you had a shorter loan term. A larger down payment will also help lower your monthly payments when you finance.


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