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Car Sense

Should You Buy or Lease a Car?

Deciding to invest in a new set of wheels is just the beginning of a long string of choices.

Should you buy or lease? If buying, should you go new or used? What about the interior: fabric or leather? When it comes to type: electric, gas or diesel?

While we can’t speak to your upholstery or fuel preferences, we can offer tips to save you time, money and stress. (We can also help when it comes to shopping for car insurance, too!)

Is it better to lease or buy a car?

Although the decision to buy or lease comes down to money for most people, it also depends on your lifestyle, how you treat your car and how long you plan to keep it.

Buying may be the perennially popular choice, but leasing continues to gain traction. (Right now, more than a quarter of all drivers are going this route, reports Edmunds.com.)

When is leasing a car a good idea?

Typically, leasing is a good option if you:

  • Don’t want to worry about repairs – if they happen, the warranty usually covers them (but read the fine print).
  • Consistently drive an average number of miles per year, usually between 10,000 and 12,000.
  • Have a stable income and don’t mind always having a car payment.

Check the terms of your lease for specifics, but consider these general pros and cons:

Pros and Cons of Leasing a Car
Pros Cons
  • Less or even no money down and lower monthly payments
  • A new car every few years
  • Low to no maintenance costs
  • A tax deduction for small businesses (always consult a tax professional for trusted advice about your specific situation)
  • May require a higher credit score
  • May face costly wear-and-tear charges at the end of your lease
  • Mileage is capped (and you'd pay penalties by the mile if you’re over the limit)
  • If you decide to buy the car, it’s more expensive at the end of the lease than if you bought it outright

If leasing seems like the choice for you, also keep in mind the following:

  • Mileage penalties: Although most leases allow 12,000 miles per year, many now offer as little as 10,000. Make sure you know exactly how many miles you can drive as penalties can run upwards of 15 cents per mile.
  • Length of lease: Lease companies offer several time periods in which to pay your lease. According to Edmunds.com, a three-year (36 month) lease is often best since most manufacturers’ warranties cover at least that long.
  • Available incentives: Some manufacturers will offer incentives on cars that aren’t selling well, so make sure to ask your car dealer about them.
  • Taxes and fees: You pay taxes and fees monthly on a lease versus initially when buying, so make sure you get the actual monthly payment with taxes and fees before making any decisions.

When is Buying a Car a Good Idea?

If buying is more your style, you’re in good company. Ownership is in our nature. Many people want to be able to say, “I own it!” rather than “I’m borrowing it.”

Buying is typically a good idea if you:

  • Are OK with driving your car well after it’s paid off.
  • Drive more than 12,000 miles per year.
  • Want to recoup some of your money when you sell.

Again, check the specific terms of your sale and financing agreement. But when you go to buy a car, consider these general pros and cons:

Pros and Cons of Buying a Car
Pros Cons
  • It’s all yours
  • The payments stop once the car is paid off
  • You’ll avoid the extra charges that can come with leasing
  • More money due at signing and higher monthly costs
  • Repair and maintenance expenses
  • Depreciation incurred if you plan to resell the car when it’s paid off

If you’re still on board to buy, keep this information in mind:

  • Taxes and fees: Make sure you know the total cost of the car, not just the monthly payment. Ask your dealer for the out the door price – the number that includes the payment, taxes and any other fees associated with the purchase.
  • Trade-in value: Consider the trade-in value of your current car (if you’re looking to get rid of it) and whether selling it privately might get you some extra cash. (Check out more information on what to know before trading in your car.)
  • Negotiate before you discuss financing. In some cases, dealerships will offer a different price if they know you’re financing through them.
  • Ask about financing options. Dealerships often offer their own financing, so they may steer you in that direction. Just keep in mind that local credit unions and banks can offer competitive rates, too.

Car Insurance for new, used and leased cars

We all know new cars depreciate fast – by most estimates, about 20% the first year and then around 10% every year after that.
That means if your car gets totaled, you could be in a tough spot if the actual cash value of your car is less than what you still owe on your car loan. But just because your car depreciates doesn’t mean your insurance coverage should, too.

Keep that new car feeling with ERIE’s New Auto Security coverage endorsement* for just a few extra dollars per month. You can add it at any time for these benefits:

  • If you’ve had your car less than two years and it gets totaled, ERIE will reimburse you the cost to replace it with the newest comparable model year (minus your deductible).
  • If you’ve had your car longer than two years and it gets totaled, ERIE will pay the cost to replace it with a comparable model that’s up to two years newer and up to 30,000 fewer miles than the current mileage of your car (minus your deductible).
  • If you lease your car, coverage is provided for the difference between the actual cash value of the auto and the amount due under the terms of your lease or loan.

Learn more about auto insurance from ERIE or talk to a local agent for a free quote.

*Vehicle is considered new when less than two years old. Eligible vehicles must carry both comprehensive and collision coverage and replacement value must be based on a comparable model. The endorsement is sold on a per-vehicle basis, not per policy, and contains the specific details of the coverages, terms, conditions and exclusions. Please note that New Vehicle Replacement and Better Vehicle Replacement do not apply to leased vehicles; only the Auto Lease/Loan Security Protection applies to leased vehicles. When payment is made under new vehicle replacement or better vehicle replacement, auto lease/loan coverage will not apply. Coverage does not include items such as overdue payments and carry-over balances from previous leases/loans, etc. Coverage is not available in all states. Insurance products are subject to terms, conditions and exclusions not described here. Ask your ERIE agent for details.

Although the decision to buy or lease comes down to money for most people, it also depends on your lifestyle, how you treat your car and how long you plan to keep it. /blog/to-buy-or-lease Erie Insurance https://www.erieinsurance.com/-/media/images/erieinsurance/erieinsurancelogo.png

ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York).  The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.


The insurance products and rates, if applicable, described in this blog are in effect as of August 2020 and may be changed at any time. 


Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 


The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia, New York and Wisconsin.  ERIE long term care products are not available in the District of Columbia and New York. 


Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.


Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.