SAN ANTONIO – With higher car prices and higher interest rates, too, deciding between buying or leasing your next car can be a tough call.
The average price paid for a new car is nearly $50,000, and interest rates are above 6%. So, no matter which you choose, you’re looking at a bigger monthly payment.
On the surface, Consumer Reports says leasing can be more appealing than buying.
“First, the vehicle is always under warranty,” said Consumer Reports auto expert Jon Linkov. “Second, you’re always driving a car with the latest safety features. And third, if you’re working part-time in the office and part-time at home, you’re not driving as much, so that means you probably won’t exceed the lease’s limits on how many miles you can drive.”
Monthly payments are usually lower with a lease because you’re not paying for the full value of the car. That means you may be able to drive a more expensive vehicle than you’d normally be able to afford. While all of that might sound appealing, there’s one hard fact about leasing: At the end of the term, you’ll have to return the car because you don’t own it.
“A major downside of leasing is that you’ll have an endless cycle of paying for a car. You’ll never be without a car payment because as soon as your lease is up, you’ll have to either buy a car or get into another lease,” Linkov said.
It’s difficult to make a fair head-to-head comparison, but in general, two back-to-back three-year leases will always cost more compared with buying and owning a car over that same period. That’s because you’ll own an asset after that period.
If you do choose to buy your next car, Consumer Reports says there are some easy ways to save.
- Don’t rely on a dealer for the best loan rate. Check to see if your bank or local credit unions offer lower rates.
- If you’re not set on a specific car, shop around for manufacturer’s incentives.
- If you choose to lease, you should still negotiate the price of the car and the terms of the deal.