When it comes time to rent or buy a car, there are a lot of factors to consider. It can be difficult to decide which option is best for you and your family.
In this article, we will outline the pros and cons of renting versus buying a car. By the end of it, you should have a good idea of which option is right for you!
Hertz
J.D. Power ranks Hertz as the best car rental company in North America, and for good reason. Their focus on customer satisfaction means you’ll have a great time renting from them – from start to finish.
Enterprise
Enterprise Rent-A-Car has locations all over the world, so they’re bound to have one close by. Plus, they offer a wide selection of cars – from economy to luxury – so you can find the perfect ride for your trip.
Fox Rent-A-Car
Fox Rent-A-Car is the perfect solution for budget-minded travelers. They offer low rates on all of our vehicles, so you can hit the open road without breaking the bank.
* With Expedia member prices, you could save 10% or more right now on thousands of cars.
Should I Buy or Rent a Car?
You should rent or lease a car instead of buying one. Why? The main reason is that it’s cheaper in the long run. When you lease a car, you only have to pay for the portion of the car’s value that you use during the time period of your lease. This means that your monthly payments will be lower than if you were to buy the same car outright.
Buy vs Rent a Car: What are the Factors to Consider?
There are a few key factors that you should consider when deciding whether to rent or buy a car. These include:
- How long do you need the car for?
- How much can you afford to spend each month?
- Are you willing to make a long-term commitment?
Let’s take a closer look at each of these factors.
How Long Do You Need the Car For?
This is an important question to consider when deciding whether to rent or buy a car.
For short periods
If you only need the car for a short period, then it doesn’t make sense to purchase it outright. Instead, you should lease the car for the duration of time that you need it.
For business purposes
In case, you need a car for business purposes and you can write it off as a business expense, then it might make sense to buy the car instead of leasing it.
For long periods
If you need the car for an extended period, given the fact the value of a new car only goes down through the years and adding the fact that you can change the model of your car rental (lease) every few years, it would be wiser to rent a car.
For example, let’s say you need a car for two years. You could either purchase a new car outright or lease it for two years and then return it.
In 2022, the average price of a new car is expected to be around $47,000. If you purchased a car outright, you would have to pay the full price plus interest and taxes.
Also, purchasing a car outright would cost you more in the long run, as you would have to pay for things like insurance, registration, and maintenance.
Over two years, you would end up paying around $53,000 for the car.
However, if you leased the same car for two years, you would only have to pay for the portion of the car’s value that you use during those two years.
In 2022, the average price of leasing a new car is around $467 per month. This means that your monthly payments would be lower and you would only end up paying around $11,208 on average over the two years.
As you can see, leasing a car is far cheaper than buying one outright, even if you need it for an extended period of time.
How Much Can You Afford to Spend Each Month?
Your monthly budget is another important factor to consider when deciding whether to rent or buy a car.
If you can afford to spend more each month, then buying a car outright might be the better option for you. Also owning a car can give you a sense of security as you have an asset to your name.
On the other hand, if you’re on a tight budget and can only afford to spend a certain amount each month, then leasing a car might be the better option for you.
Are You Willing to Make a Long-Term Commitment?
Another factor to consider is whether or not you’re willing to make a long-term commitment.
If you’re not ready to commit to anything long-term, then leasing a car might be the better option for you. This is because leases typically last for two or three years, after which you can return the car and get a new one.
On the other hand, if you’re looking for a car that you can keep for many years to come, then buying one outright might be the better option for you.
To sum it up, these are some of the key factors that you should consider when deciding whether to rent or buy a car. Ultimately, the decision comes down to your personal needs and preferences.
Should You Rent or Buy a Used Car?
In the case of renting versus buying a used car. We would still recommend renting over buying for the same reasons as above.
The only exception to this would be if you found an amazing deal on a used car that was significantly lower than its market value. In this case, it might make sense to buy the car outright and then sell it later when you’re done with it.
Of course, you would have to factor in the cost of insurance, registration, and maintenance when considering whether or not to buy a used car.
Whatever you decide, make sure that you compare the costs of both options before making a decision.
The Pros Of Renting Or Leasing A Car
As you can see, renting a car seems to be the better option. The monthly payments are generally lower because you’re not paying back any of the principal amount – you’re simply borrowing and repaying the car’s depreciation plus finance charges.
- You drive the car when it is most likely to be without problems.
- You’re always behind the wheel of a new model with a manufacturer’s new-car warranty.
- Some leases come with complimentary oil changes and other regularly scheduled maintenance
- With some companies, you have the opportunity to drive a luxury car that you may not be able to afford through other means.
- The newest active safety technology will be installed in your car.
- You won’t have to worry about changes in the vehicle’s trade-in value or the hassle of selling it when you’re ready to relocate.
- Business owners may benefit from numerous tax incentives.
- You just return the car to the dealer at the end of your rental period.
The Cons of Renting Or Leasing A Car
There are several drawbacks to signing a lease, even if it appears to be attractive:
- Leasing frequently costs more than a similar loan since you’re paying for the car while its depreciation is at its fastest.
- If you continuously lease cars, your monthly payments will never end. In comparison, the longer you keep a car that has been paid off, the more value it has. The easiest way to drive over time is to acquire a vehicle and store it until it becomes uneconomical to maintain.
- Lease agreements have a mileage limit. If you go over the specified distance, you will be charged an excess mileage fee. That can range from 10 cents to as much as 50 cents for each additional mile traveled. So remember to figure out how far you’ll travel. You won’t earn any miles for unused miles.
- If you want to avoid being charged for wear-and-tear, keep your car in good condition. If your kids like to color on things or you’re constantly getting dents and scratches, be aware that you’ll have to pay more at the end of your lease.
- If you don’t like the car or can’t afford the payments, you may be out of luck. If you terminate a lease early, you will almost certainly be hit with thousands of dollars in early termination penalties and fees and they’ll all come at once. The costs might total for the entire lease period.
- Oftentimes, with a few exceptions – for example, professional window tinting – you have to bring the car back in showroom condition. This means it should be minus usual wear and tear, configured like it was when you leased it.
- You’re still responsible for non-essential products like tires, which are more expensive to replace on a vehicle with better wheels.
- At the end of your lease, you might have to pay a fee.
An Alternative To Renting Or Leasing
To get a lower monthly payment, some car buyers choose to pay longer-term car loans of 6 to 8 years. Longer loans, on the other hand, might be risky; therefore, leasing may be a better alternative for these consumers. It’s easier to get “upside down” – when you owe more than the vehicle is worth – with longer loans. If you need to sell the car early or it gets damaged or stolen, the trade-in value, resale value, or insurance settlement will most likely be less than your outstanding debt.
Loans are not the best way to go about buying a car if you want to get a new one every few years. The finance charges alone on long-term loans will be much higher than the principal, so it’s actually smarter to lease in that case. And if you can’t pay off an upside-down loan, meaning you owe more money than the car is worth, you can often roll that amount into a new loan. However, then you’re just financing both the old and new cars.
If you want to have lower monthly payments and get a new vehicle every few years without much problem, then leasing may be worth the added cost. But make sure you can handle all restrictions on mileage, wear and tear, etc.
Always Negotiate Your Price
Though it may seem permanent, the monthly payment advertised in a leasing campaign is likely based on the manufacturer’s suggested retail price – which can be haggled like any purchase.
In order to negotiate a lower monthly price, start by finding the invoice price of the advertised vehicle. The invoice is what the dealer pays for the car and is usually around several hundred dollars less than MSRP (Manufacturer’s Suggested Retail Price).
From there, you can use various negotiation tactics to bring down the monthly cost of your lease.
The bottom line: don’t accept the first offer.
By law, dealers must give you a copy of the vehicle’s leasing guide which will outline all the fees associated with your lease agreement. Ask for this guide before signing any paperwork.
What is the difference between a Loan and a Lease?
The biggest difference between a loan and a lease is what happens at the end of the term. With a loan, you own the vehicle outright and can do with it as you please. You can keep it, sell it, or trade it in. With a lease, on the other hand, you have to give the vehicle back to the dealership. You’re essentially borrowing it for a set period of time and mileage.
Another key difference is that, with a loan, you’re building equity in the vehicle as you make your payments. With a lease, you’re never building equity because you don’t own the car – meaning that if it depreciates quickly, you could be left “upside down” on your lease.
If you’re looking to own the vehicle outright and have the option to keep it, sell it, or trade it in at the end of the term, then a loan is probably the better choice. If you’re looking for lower monthly payments and don’t mind giving the car back at the end of the term, then a lease might be the better option.
Wrapping Up
Renting or leasing a car is a big decision with pros and cons on both sides. Be sure to do your research and ask lots of questions before signing any paperwork. And always remember to negotiate – you might be surprised at how much lower that monthly payment can go.
Do you have any experience renting or leasing a car? Let us know in the comments below.