![Should You Buy or Lease Car? Should You Buy or Lease Car?](https://cdn.moneykey.com/uploads/2019/03/A-long-line-of-cars.jpg)
Buy or lease? It’s the age-old question, and one that doesn’t always have an obvious answer. All you know is you need a vehicle to get you to and from work every day — and you need it soon! Among things like brand, fuel efficiency, and safety rating, the price is one of the most important features of your new vehicle. And whether you buy outright or lease a vehicle plays a huge part in what you’ll pay. Choosing the right option for your finances isn’t always easy, but here at MoneyKey, we’re all about simplifying complicated issues. Usually, that means streamlining the online borrowing process. Today, it means we’re breaking down the two most popular financing options in hopes of making your choice easier. So let’s hit the gas and compare what it means to buy and lease, so you know which one’s right for you.
Buying a car — what does that mean?
It’s exactly as it sounds. When you purchase a car, you take over full ownership of the vehicle. That means you get to keep it as long as you want. You can purchase a new car as soon as you have the money, or you can keep it as long as it takes to drive into the ground. The average price of a new car is $34,000, while used car prices aren’t much better — according to USA Today, used car prices rose to nearly $20,000 last year. Few people purchase their car outright in full because of this cost. As one of the biggest purchases you may make in your lifetime, it’s an expensive investment.Some people finance a vehicle with a loan
Most people need help making a purchase this big, which is why many turn to a car loan for help. At its most basic level, you could say it’s like any personal loan, including personal installment loans and personal lines of credit. After all, the lender agrees to lend money to the borrower, and the borrower agrees to pay it all back, plus interest and other fees.![cash on top of an envelope](https://cdn.moneykey.com/uploads/2019/03/cash-on-top-of-an-envelope.jpg)
What is a good credit score to buy a car?
If you’re wondering what credit score is needed to buy a car, the short answer is: it depends. While there’s no credit score that will immediately disqualify you for all loans, a low or poor score may limit your options and force you to get a loan with higher rates.![person holding car keys](https://cdn.moneykey.com/uploads/2019/03/person-holding-car-keys.jpg)
- What credit score do you start with?
- What is the highest credit score you can get?
How does buying a car with a loan differ from a lease?
![Lineup of cars parked to buy or lease](https://cdn.moneykey.com/uploads/2019/03/lineup-of-parked-cars.jpg)
A lease may be the best option
Although there is no ‘one-size-fits-all’ answer, a lease is often the less expensive option for most people. Not only are you likely to spend less on your monthly payments, but you’ll also gain a warranty while side-stepping the effects of depreciation at the end of your terms.![A person signing a contract to lease a car](https://cdn.moneykey.com/uploads/2019/03/person-signing-a-contract.jpg)
How to make your lease fit your finances
Before you sign your name along the dotted line, you’ll want to do some research. Knowing what’s available and what you can realistically afford will help you determine if a lease is an appropriate addition to your monthly responsibilities.![checklist in a notepad](https://cdn.moneykey.com/uploads/2019/03/checklist-in-a-notepad.jpg)
Step #1: Knowing your options
Find out as much as possible about your vehicle
Due to the sheer size of this purchase, it’s wise to know what you want in a car before you start test driving. You should think about what you expect in terms of mileage, safety tests, size, and speed. Each of these things may impact its final cost and knowing how these features may affect your lease could help you choose the right car for your needs. If you have no idea where to begin, this shopping tool is an easy way to explore your options.Choose your down payment wisely
As a general rule, paying a larger down payment usually lowers your monthly payments and interest. The impact of this rule may vary depending on the interest rate applicable to your lease. Otherwise known as the money factor, the interest rate affects how much you owe as much as the principal sum. If your lease contract promises a low interest rate, the lower interest rate as a result of a larger down payment may not be worthwhile depending on other potential uses of the same money. If you aren’t sure where you stand, Edmund’s has a helpful guide on whether it may make sense to make a down payment for a lease. It compares a zero-down payment with a $2,999 down payment on the same vehicle to show how there’s only a $70 difference in overall costs. The impact of a higher down payment on the cost of your lease will be similarly small where your lease terms involve a low interest rate. This may take some weight off your mind — especially if money’s tight and paying a large down payment would put the rest of your budget at risk. If the money factor is low, you won’t be penalized too heavily by skipping a down payment. Once you have a better understanding of the costs that await you, you’re ready to move on to the next step.Step #2: Knowing your finances
Check in with your budget
Perhaps the most important step before signing a lease is knowing how much you can realistically afford to spend each month. You’ll have better success with this step if you have a budget. A budget is a financial tool that will help you keep track of where your money is going — from every paycheck deposited in your account to every purchase you make. Note that no spending is too small; you should tally the money you spend on gum, streaming services, and takeout just as carefully as the money you spend on utilities, housing costs, and payday loan repayments, if you have them.![Calculator and a pen to prepare a budget](https://cdn.moneykey.com/uploads/2019/03/calculator.jpg)
- Envelope budgeting
- The 5-point plan
- Smart goals and percentage plans
Eliminate unnecessary spending
Your budget will do more than track how you spend your money — it should help you create some breathing room, so you can put more money towards savings. These savings may help you face an unexpected repair following an at-fault collision, or they may help you pay for a tune-up that ends up costing more than your mechanic quoted. If you don’t have savings — or if you savings fault short of what you need — an installment loan or line of credit may be a suitable backup. With a convenient and fast application process, we offer simple online loans. You may receive yours in as soon as one business day, allowing you to take on urgent repairs without delay. You also have the support of our Customer Care team that works tirelessly to help support you at any stage of the borrowing process. This team and our dedication to customer service is part of the reason why we’ve earned an 8.8 out of 10 rating on TrustPilot at the time this article was published. While an online installment loan may help you in an emergency, ideally, you’ll have enough savings to take on these repairs on your own.![Piggy bank to save money and create emergency fund](https://cdn.moneykey.com/uploads/2019/03/piggy-bank-1.jpg)
Choose to lease or buy depending on your finances
There may be no greater financial duo than an organized budget and a robust savings plan. These tools will help you stay on top of your finances at any time of the year, but they’re especially helpful when you’re ready to make a big purchase — like getting a new or used car. Leasing may be the most economical way to drive the make and model you want for less, but it’s still a big decision. Don’t overlook what a budget and savings plan can do. From helping you meet monthly lease payments on time to preparing for routine and unexpected repairs, they’ll help you take on these auto costs with more confidence. When you use every financial tool at your disposal, you’ll find a solution that fits. Remember, MoneyKey is here to help if you need an installment loan to help cover unexpected repairs associated with your vehicle.Posted in: Financial Tips Lifestyle
Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see MoneyKey's Terms of Use.