If you’re shopping for a new car on a budget, you might consider a used car or a lease. Used cars and leases are usually cheaper than buying a brand new car.
Before you decide to lease or buy a used car, there are several factors to consider. Let’s look at the pros and cons of leasing a car versus buying a used car.
Looking for a used car? Easily compare car loan rates from lenders below.
Advantages of buying a used car
Buying a used car is a good option for many drivers, especially if you’re looking for a good deal. Here are some reasons why you might consider buying a pre-owned vehicle.
- Lower out-of-pocket expenses. Used cars have less value than brand new cars, so your initial cost is often lower than buying a new car. Depending on the age of the vehicle, you may still get some of the features and benefits of a newer model.
- Imperfections aren’t that bothersome. It’s common for a used car to have a few dents or dings, so you don’t have to stress so much about the first scratch.
- You may pay less for car insurance. Depending on factors such as your location, driving record, age and claims history, your insurance costs are often lower when you insure a used car.
Disadvantages of buying a used car
While buying a used car has many advantages, there are also some disadvantages. These are some of the disadvantages of a used car.
- You can’t customize a used car. When you buy a new car, you can choose the features you want, such as interior and exterior color, the sound system, and whether it has a sunroof. A used car comes as is, and there are fewer opportunities to make changes or upgrades.
- Maintenance and repair costs are your responsibility. Car maintenance is important, especially if you want the car to last a long time. New cars usually come with a manufacturer’s warranty, which you don’t get when you buy a used car. You will pay for repairs and maintenance out of pocket unless you have a extended warranty from the merchant.
Advantages of renting a car
Leasing a car allows you to drive a new vehicle every few years. It’s a great option if you want a car with the latest features and technology, without the commitment and high cost of ownership. Here are some good reasons to consider renting a car.
- Enjoy many of the benefits of a new car. Leasing gives you the benefits of having a new car, such as the latest technology and a warranty, at a much lower cost than buying new.
- Your costs are lower. When you rent, your initial out-of-pocket expenses, as well as your monthly payments, are much lower than when you buy a new car. Some leases don’t even require a down payment.
- Don’t worry about depreciation. When you lease a vehicle, you don’t have to deal with depreciation or loss of value. Simply return the car at the end of the rental period and the dealer takes responsibility for any depreciation.
- Simplify your taxes. If you rent out a vehicle for business purposes, you can usually write off fuel and mileage on your taxes.
- You can have a new car every few years. After your rental period has ended, you can hand in the vehicle and rent a new one. You can enjoy having a new car every few years without committing to ownership.
Disadvantages of renting a car
Many drivers enjoy leasing, but it’s not the right choice for everyone. Here are some disadvantages of renting a car that you should be aware of before choosing this option.
- You always have payments. When you lease a vehicle continuously, you always have monthly payments to make, and you will never own the vehicle (unless you buy it at the end of the lease period).
- You will pay more for car insurance. You may pay higher car insurance premiums when you lease a vehicle. Additionally, lenders often require renters to carry full coverage auto insurance, which is more expensive than minimum coverage.
- You may have to pay penalties for extra miles. When you rent a car, you have to return the car under a certain mileage. If you go over those miles, you often have to pay penalty fees.
- You may be fined for wear and tear. If you return the rental vehicle with scratches, scuffs or stained upholstery, you may face fines if the rental company feels the car was returned in worse condition than when it was first rented.
- You cannot make any changes to the vehicle. Because you are basically renting the vehicle, you cannot make any changes or modifications to a rental contract.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with over three years of experience covering personal finance and insurance. She has extensive knowledge of various lines of insurance, including auto insurance and property insurance. Her byline has appeared in dozens of online finance publications, such as The Balance, Investopedia, Reviews.com, Forbes and Bankrate.