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Every college student dreams of having a car of their own. Goodbye rideshare, hello spontaneous road trips! But before your dream can come true, you’ll have to face the sometimes daunting question: to buy or to lease? 

Buying a car is very straightforward. Typically, you’ll take out a loan to finance the purchase. Once you’ve paid off your loan, you will officially own the car. Purchasing a car is beneficial in the long run because you are able to eventually sell the car and make a small profit. Purchasing used cars is always a solid and budget friendly option as well.

Essentially, leasing a car is when you rent a car from a leasing company or dealership. As long as you make the monthly payments, you are able to drive the car for an agreed number of miles. But at the end of the lease term, you don’t hold ownership over the car and must return the vehicle back to the dealership. 

A benefit of leasing is that you don’t have to deal with the hassle of selling the car, which is helpful if you know you’ll only need a car for the short term (2-4 years).You’re not spending as much as you would when purchasing a permanent car, too, and when you lease, you’ll typically be leasing a new car. When you purchase a used car, there will usually be a few miles on it. 

However, this is really the only benefit, especially if you place a lot of value on driving a new car. You sometimes have the option to purchase it at the end of your lease, usually at a discounted price. 

On the other hand, it’s important to remember that, although you don’t own the car when leasing, you’re still responsible for any maintenance and repairs the car may require. And should you find yourself unable to make the monthly payments, you are stuck with the lease unless you default or fail to comply with the lease. This in turn affects your ability to lease a car or take out a loan in the future. If you own the car and can no longer make your payments, you can at least sell your car to pay off your loan and escape the damage to your credit. 

When making this decision, it’s imperative that you have a solid understanding of your financial standing. While there are always financing options available, you want to go into this process knowing what you can afford, rather than waiting for the salesperson to give you a “good deal.” If you make the mistake of doing the latter, you’ll only come to realize that you’re in over your head in monthly payments. It’s always important to remember that car loans and leases can have a significant impact on your credit score. 

Think realistically and responsibly about what your financial situation will be in the coming years. If you’re a senior, do you have a job lined up after graduation? Does your budget after graduation allow for monthly car payments? Does the city you are living in have accessible public transportation? How long will you need the car for? These are all questions you should consider during your car search. 

So, what should you do? In short, it depends on your prospective situation. 

I would choose to purchase a car. The monthly payment for a lease may be lower than the payments for owning a car. But you’re saving money in the long run because, once you finish off your monthly payments, you’re left with the value of the car. Car sales have also been down due to the pandemic, so many dealerships are offering discounts and deals to try to boost the sale of cars. 

If you have the means, this might be a good time to purchase a car. Think of purchasing a car like purchasing an engagement ring. It’s (hopefully) a worthwhile investment, but it means you’re in it for the long haul.

As always, the Office of Financial Literacy is open to help you answer these difficult questions and discuss what might be the best option for you. 

Andrea Lan is a junior finance major. Her column appears biweekly. She can be reached at alan01@g.syr.edu. She can be followed on Twitter at @AndreasLandBlog.

Published on February 8, 2021 at 9:28 pm