When the COVID-19 pandemic hit, it changed a lot of things for people all over the world.
One change that may have gone unnoticed by some is how it has impacted how people are leasing and buying vehicles.
Let’s compare and contrast the two methods of obtaining a car and discuss the types of insurance required for a lease or purchase.
The Rise of Leasing Over the Past Few Years
There are a couple of reasons why leasing has grown in popularity since COVID first hit.
Some of the major reasons why revolve around people simply driving their vehicles less and desiring lower monthly payments.
However, news organizations like U.S. News & World Report claim that the COVID pandemic could have changed car buying forever.
Lower Monthly Payments
The monthly payments for a lease are often lower than financing a purchase, which can appeal to budget-minded consumers.
In addition, leasing generally comes with built-in warranty coverage and maintenance plans, so unexpected repairs are usually not the lessee’s responsibility.
Driving Your Vehicles Less
Another big reason people are choosing to lease rather than buy is that many are driving their vehicles less.
With so many people working from home, there’s simply less need for a car. This has led to an increase in the number of people using ridesharing services or public transportation.
Vehicle Leasing vs. Buying a Car in Today’s Economy
Now that we’ve looked at some of the reasons people are choosing to lease over buying, let’s look at how each option stacks up in today’s economy.
The Type of Vehicle You Want Plays a Role
The type of vehicle you want will play a big role in whether leasing or buying is the better option.
For example, if you’re looking for a luxury car or SUV, you may be better off leasing because it will allow you to drive a nicer car than you could afford to purchase.
On the other hand, if you’re looking for a more affordable car, buying may be the better option.
Your Budget
If you have a limited budget, leasing may not be an option because you’ll likely need a larger down payment.
On the other hand, if you have a good credit score, you may be able to get a lower interest rate when financing a purchase, which can save you money in the long run.
How Long You Plan to Keep the Car
If you only need it for a short period of time, leasing may be a better option because you can return the car at the end of the lease term.
However, buying may be a better option if you plan on keeping the car for several years because you’ll eventually own the car outright.
According to Kelley Blue Book, many people look into leasing as a way to hedge against changes in market conditions.
So the length of time you own the car might not be as important as what you believe will happen to the vehicle market in the coming months or years.
Your Credit Score
Your credit score is another important factor to consider because it can impact the interest rate you’ll pay if you finance a purchase.
If you have a good credit score, you may be able to get a lower interest rate, which can save you money in the long run.
Required Insurance for Leasing vs. Purchasing a Vehicle
One important consideration when deciding whether to lease or buy a vehicle is the type of insurance required.
For a leased vehicle, you’ll need to carry collision and comprehensive coverage in addition to your state’s minimum liability insurance requirements.
GEICO reports that leasing a vehicle typically entails higher insurance premiums.
If you’re financing a purchase, you’ll still need collision and comprehensive coverage, but the lender usually doesn’t require it.
It’s important to compare the cost of insuring a leased vehicle versus a purchased vehicle before making your final decision.
The last thing you want is to be involved in a car accident and be caught without insurance.
Should You Lease or Buy Your Next Vehicle?
Now that you know some of the key considerations, it’s time to make a decision.
If you’re looking for a lower monthly payment and don’t mind returning the car at the end of the lease term, leasing may be the best option for you.
However, if you’re looking to eventually own the car outright and don’t mind a higher monthly payment, buying may be the better option.
There are ways to save on a car purchase if that’s the route you choose to go.
The bottom line is that there are pros and cons to both leasing and buying a car. No matter which option you choose, be sure to compare insurance rates and research all of your buying and leasing options before making your final decision.
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