Contrary to popular belief, more millennials are buying and leasing cars than ever. In fact, they will represent 40 percent of new car purchases by 2020. Not sure whether you should buy or lease? It’s largely a matter of personal choice—neither option is inherently better than the other.
Here are five tips for millennials looking to buy or lease a car from Suffolk Federal, so you can decide which is the right option for you.
- Bells and whistles? Whether you buy a car or decide to lease, you can always choose to add special options such as leather seats, a sunroof, heated steering wheel or whatever other amenities you want. Although the more options you add will make your monthly payments go up no matter which route you choose, leasing a car can usually get you a fancier car for less money.
- Go the extra mile (or don’t). When you lease, you have to determine the number of miles you’ll be putting on your car every year—and there’s typically a 10- to 15-cent charge for each additional mile you drive over your plan limit. And those few pennies can really add up. Let’s say you choose the 12,000-mile option but go over by 5,000 miles—you’ll find yourself paying a couple hundred dollars more than you were planning on when your lease is up. If you buy a car, it’s yours, so no need to worry about how many miles you put on each year.
- Old vs. new. If you prefer to be in a new car every three to five years, then leasing may be for you. A positive to leasing is that you sign your lease for a specific number of years and get to trade it in for another—generally newer—model. If having a new car is not a priority, then buying a car may be a better option since it’s more economical in the long term.
- To pay or not to pay? Buying a car means that you have to deal with the monthly payments for the length of your loan (36, 48, 60 or 72 months), but once you pay your loan off, the car is yours so you can look forward to no car payments. A downside? Monthly payments for purchasing a car are generally higher than when you lease. Although the monthly payments are typically lower for a car lease, you will always have a car payment. Plus, the cost of insurance tends to be pricier for a lease.
- Warranty. A leased car will always be under factory warranty so you won’t have to pay as much if something goes wrong. However, when you go to trade it in, you’ll be charged for any excessive wear-and-tear that the dealer discovers. If you buy a car, plan on following the motto: “You break it, you bought it.” When you have to bring it in for any services, once the warranty expires, you’ll be paying for any repairs out of pocket.
Once you’ve decided whether a new or used car is best for you, check out the auto loans at Suffolk Federal where you’re sure to save time and money.