Q: Am I better off buying or leasing a car now?
A: The chip shortage and other factors relating to the pandemic, as well as inflation, have made for a tight auto loan market the likes of which haven’t been seen in years.
Let’s look at buying and leasing a car, paying attention to unique factors in today’s market, to help determine which one makes the best sense now.
Buying a car in 2021
If you choose to buy a new or used car right now, you’re looking at inflated prices and a supply shortage many months in the making. Expect to pay about $40,000 for a new car and $23,000 for a used one, according to Edmunds.com.
Leasing a car in 2021
The leasing market hasn’t been spared the after-effects of the chip shortage and resultant vehicle supply lag. Many lease companies are struggling to serve customers while facing a shortage in available cars. The rising prices have hit this market, too.
If you’re nearing the end of a lease, you may be in luck. Auto dealerships are desperate for cars to sell, and they may offer to buy out your lease at an inflated price, leaving you with extra cash to put toward financing your next car.
Buying VS. Leasing
In every market, there are some drivers who are better suited to owning a car, and others who benefit more from leasing. Here are some factors to consider:
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How long do you hold onto your cars? If you like to swap your car for a newer model every few years, a lease may be a better fit for you. However, if you tend to hold onto your cars for many years, consider buying instead.
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Insurance costs. Leases require full insurance coverage, which can be pricey. When you own your vehicle, though, the amount of insurance coverage beyond what’s required by law is up to you.
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Mileage. If you usually put 10,000+ miles on your car annually (the standard allowed by most leasing companies before charging extra), you may be better off buying a car. Keep in mind, though, that you’ll still need to pay for those miles in depreciation costs of the car.
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Maintenance costs. When you lease a car, you’ll need to pay for anything related to wear and tear, but most other repairs are covered by the lease company. You’ll also have the option to pay extra for tire protection and dent and scratch insurance. When you own your car, you’re on the hook for these costs, plus any needed maintenance.
If you’re choosing between buying or leasing a car, weigh all variables carefully before making your decision.