Helping Solve the Age-Old Question: Lease or Buy?

Lease or buy? Deciding which way to go is a bit of a toss-up these days. For the financially conservative, buying within your means has always been the recommended approach. Despite higher monthly payments, that vehicle is yours at the end of the loan period. You have equity and a safety net.

But those ‘higher’ monthly payments? They’ve reached record heights, and loan terms aren’t far behind. New data from Edmunds reveals the average APR on new financed vehicles is now at its highest level since 2008.

To create some semblance of affordability, many folks are opting for longer term lengths to spread out the increased costs. That average now sits around 70 months, meaning a fresh-faced 2023 pickup truck will still be drawing on your checking account come 2029. Here’s hoping no costly repairs pop up in the interim…

As new vehicle prices steadily ticked up over the last several years, consumers took notice. And those who were leery of buying used or committing to never-ending term lengths started eyeing up an alternative — leasing.

With leasing, a person can still get into a new vehicle (traditionally, every two years) but they do so at a noticeably lower monthly cost since they’re paying on depreciation, not purchase price. The tradeoff? Limitations on mileage, fees on excess wear and tear, and the inability to build equity. Usually, a leasing contract will include a buyout option when terms are up, but the vehicle only becomes an actual asset when you exercise that option.

So, is one arrangement really better than the other? And how does the age-old question — lease or buy — play out in a post-pandemic market of tight supply and skyrocketing price tags?

A Closer Look at Leasing

Buying a vehicle is pretty straightforward. Generally speaking, a person makes a down payment on the vehicle of their choice and then finances the rest through a bank or the dealership. After a certain amount of monthly payments, the loan is paid off (with interest, of course) and the title handed over. Paperwork and trade-ins can complicate the process a bit, but ultimately, it’s quite cut and dry.

Leasing, on the other hand, is a little more nuanced. Similar to a renter-landlord agreement, there are a lot of terms and conditions in a leasing contract that limit what a person can do to (or with) the vehicle in question.

Just like you can’t paint neon flames down the sides of your apartment and stuff it with adopted stray cats, your leased vehicle must maintain a certain level of marketability for resale — since that’s exactly what the dealership plans to do with it when you hand it back over.

Since you are basically playing the role of caretaker while the leased vehicle is in your custody, there are certain rules you must play by. They generally include:

Mileage Allotments

To protect the vehicle’s residual value, there are limits on how far you can push that odometer before accruing overage fees. Allotments usually range from 10,000-15,000 miles per year, but these numbers can be negotiated before signing.

When considering leasing, it is critical to review mileage allowance to ensure it aligns with your anticipated usage. The fee for going over can be as much as $0.50 per mile! You don’t receive any benevolent ‘thank-you’ credits for unused miles, either.

Wear & Tear Expectations

Leasing contracts also include terms that require payment for anything beyond “normal” or “standard” wear and tear. But what exactly does this mean? Well, mechanical issues, a damaged or dirty interior, dings, dents, scratches and bald tires all make the list — but so do things like aftermarket modifications, mismatched tires and even forgetting to turn in the second set of keys.

CCI Imposter Series Wheel Skins turn OEM wheels into a fresh new look.

That said, it’s a good idea to get a lease inspection done roughly three months before end-of-contract. This will give you an opportunity to assess any damages the inspector finds so you can seek out cheaper repair options. (Chances are your mechanic will charge less than the dealership.)

Taking some quick snapshots when you first lease the car couldn’t hurt either. Especially if you swear that scratch was there when you got it.

Termination Clauses

While leasing contracts are not designed to be broken, you can terminate early if necessary — but it’ll cost ya.

The easiest route these days seems to be transferring the lease through an online third-party vendor like Lease Trader or SwapALease. Just be aware that you would still be responsible if that new lessee stops making payments, and you’d be paying transfer fees to boot.

Other options are to trade in the vehicle toward a new lease, appeal to the leasing company for some help or just eat the penalties at early trade-in. It goes without saying how important it is to make sure you really like a vehicle — and can afford the payments — before committing to leasing.

Gap Insurance

So what happens if that sweet new ride you just leased gets totaled or stolen? Essentially, you would be required to cover the difference between what you still owe and what it’s actually worth. Spoiler alert: that could be thousands of dollars, especially since new cars depreciate the most in the first few years.

Gap insurance helps cover this, well, gap. It’s not a required rule of leasing, but it is highly recommended — even for those who are buying new. And with the insurance industry being as competitive as it currently is, there is no shortage of options.

A Note On Used Car Leases

As if car buying or leasing weren’t already a stressful gamble, some dealerships offer used car leases. In theory, they sound great: Lower monthly payments for a low(ish) mileage car that is less than four years old, certified pre-owned and has already hit the worst of its depreciation in value. In practice? We advise to just stay away.

Unless you are really savvy in leasing legalese or have a strong working knowledge of cars, there’s a good chance you are just getting somebody else’s headache. And at the end of two years, you won’t even own said headache.

Leasing & Buying in the Current Market

Obviously, leasing is not an ideal scenario for everyone – particularly those who put a lot of miles on their vehicle. However, for the youngest and oldest generations, it is proving to be a tidy solution.

Many Baby Boomers on fixed incomes enjoy the lower monthly payments and shorter-term lengths of a leasing contract, while Millennial and Gen Z drivers seem to thrive on the ‘no-strings-attached’ relationship that gets them into a new car every two years. It’s safe to say the country’s rising cost of living and ballooning student debt probably factor into younger generations’ decision-making as well.

A Mixed Bag For Everybody

That said, those fond of leasing have faced an interesting few years. Pandemic-strained inventory put a significant leash on dealerships’ ability (and willingness) to offer attractive terms. According to J.D. Power, leases accounted for a mere 16% of new car retail sales in the second half of 2022 — the lowest figure since the 2009 recession. Automotive analysts expect it to take several years for the industry to return to its normal leasing cycle.

As for buyers, they’ve had a rough go of it too. Average new-vehicle prices sit just below $50,000 according to Kelley Blue Book, with average APR now over 6% according to Experian. In fact, Edmunds data reveals that 15.7% of consumers who financed a new vehicle at the end of 2022 committed to a monthly payment of $1,000 or more!

Blue Ford F-150 Tremor truck sitting on rocky ground with moody sunset in background
The average price paid for a new pickup crested $59K in 2022. America’s best-seller, the Ford F-Series sold for an average $66,451.

Further complicating matters, many automakers are focusing their attention on producing higher-profit vehicles which leaves fewer budget-friendly models to choose from. And where production was ramped up, it happened fiercely — and a bit sloppily, leading to an 11% increase in problems per 100 vehicles, according to J.D. Power’s study of new-vehicle quality.

Those who saw their leases expire in the past couple years, however, made out quite well. With so few vehicles available, anyone sitting on a young, low-mileage vehicle was essentially sitting on a gold mine — assuming they didn’t need to replace it with another vehicle.

So, Lease or Buy?

At the end of the day, what people do with their own money is their own business. And choosing between lease or buy really comes down to personal finances and priorities.

As enthusiasts of aftermarket modification and personal customization, we’ll always celebrate the freedom that buying a vehicle provides, but we know what kind of strain such a purchase can put on a family’s budget. (We also know that lease-friendly aftermarket accessories have come a long way.)

Weigh your options, and take a cold hard look at your personal vehicle usage. With the current state of the market, it’s more important than ever to not rush into a decision to lease or buy. And in the meantime, why not love the one you’re with?

Sponsored by CCI

While customization shows off your individual style, and in many cases improves a vehicle’s capability and performance, it also can limit potential buyers or void your leasing contract. Thankfully, many aftermarket manufacturers — like Coast to Coast International — have found workarounds by developing temporary restyling accessories.

CCI boasts an impressive catalog of snap-on accessories, including a popular line of wheel skins. Constructed of durable automotive-grade ABS, CCI wheel skins are designed to match the exact style of the wheel’s OEM face for a perfectly fitting upgrade. They install in minutes, simply lining up with the valve stem and snapping into place by applying a balanced amount of pressure.

With CCI, you can freshen up the look of your ride or help cover up minor cosmetic damage like paint scratches or curbed wheels. You can even practice a little prevention. Adding CCI wheel skins before any damage occurs can actually help nip any chips, dings, or corrosion in the bud.

To learn more about CCI wheel skins and other great restyling accessories, visit https://www.coast2coastinternational.com/.

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