Paying for Your New Car

By Katie O'Shea, July 10, 2015

Paying for Your New Car

Katie O'Shea

Negotiating and financing a new car purchase can seem like a confusing process. As you navigate the process, focus on what your current needs are and what your future situation may be.

Let's start by looking at the different definitions of the two major pricing options:

Buying

Buying a car means taking out an auto loan to help you make your purchase. As you make loan payments, you work towards full ownership of your vehicle. With your down payment and monthly payments, you are paying for the vehicle's current retail value.

Leasing

As with buying a car, leasing entails making a down payment and monthly payments. However, unlike the payments for a car purchase, lease payments are for the cost of using a car for the period of time specified in your lease. You pay for the projected decrease in value that the vehicle experiences over the period of time that you are using the car.

Because leasing involves returning the car at the end of the leasing period, there are certain fees that you may have to pay, which buying would not require.

As you make your choice, it's important to consider what you're looking for, and which option will help you achieve your objectives. Here are some things to keep in mind as you prepare to make your decision:

Buying might be right for you if:

  • You want to own your car.
    • One major advantage of buying your car is that you are not required to keep your car's appearance to a company's standards. This means that:
      • You won't be required by a lender to pay for any damage to your vehicle.
      • You can customize your vehicle however you like.
  • You prefer to drive one car for a long period of time.
    • If you know from the get-go that you want a certain type of car, it may be a better financial decision for you to just buy the car.
    • While it is possible to buy the car you have been driving once your original lease ends, it may end up being more expensive than simply buying the car outright. The leasing process involves various fees throughout, which are important to factor into your decision process.
  • You drive a lot.
    • Leasing a car entails adhering to a certain limit of miles you can drive. If you think it is likely that you will drive more miles than the limit imposed by the company issuing the lease, it may not be worthwhile to agree to the lease.
      • Driving more miles than the contract allows often means that you will be required to pay a fee for each additional mile you drive.
      • Some lessors may offer you the option to increase the number of miles allowed in the leasing contract, but this could drive up the amount you pay each month.

Leasing might work for you if:

  • You like to drive new cars every few years.
    • If you enjoy having a new car to drive every few years, leasing can give you that option.
  • You don't plan on eventually buying the car you're leasing.
    • If you know from the start that you don't want to buy the car after your leasing period ends, then leasing may make sense. It is often cheaper to lease a car than to buy it right off the bat. However, it is important to keep in mind that it can be more expensive to continue to lease new cars every few years because the fees do add up.
  • You know you won't be driving more than the specified number of miles.
    • If you are sure that you won't be driving more than the number of miles that your contract specifies, leasing could work for you. Be sure to evaluate how many miles you think you will drive in the next few years as you make your decision.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of OneMain. The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else. The author was compensated by OneMain for this post.

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