By Allan Halcrow | American Express Credit Intel Freelance Contributor
4 Min Read | January 31, 2020 in Money
To buy, or not to buy? That is the question. Whether ‘tis better in the end to accept the pros and cons of long-term car ownership, or to take aim against depreciation and, in opposing, lease the car?
In other words, is it better to buy or lease a car? It seems a simple A or B choice. And yet, as Hamlet learned many moons ago, some binary choices are not simple. Granted, choosing between leasing vs. buying a car isn’t as profound as choosing between “to be or not to be.” Still, it is a big decision. And although neither choice is right for everyone, you can decide which is right for you by weighing what each choice means for your finances and for your lifestyle.
What can make buying a car better than leasing? Although there’s been a shift toward leasing in recent years, about two-thirds of consumers still choose to buy their cars.1 Let’s first look at what they gain—and then what it costs them.
Generational differences among buyers and changes in the auto industry have driven substantial growth in leasing.
Let’s start with the buyers. Proportionally, millennials—more than any other age group—choose to lease.4 And that seems unlikely to change given research showing that only 15% of millennials think it’s “extremely important” to own a car.5
Parallel to that shift, the auto industry’s approach to leasing has changed. A 2018 report by Cox Automotive, an industry research firm, compared leasing in 1999 to today.6 Leasing then was used most often to unload cars that weren’t selling and targeted consumers who otherwise couldn’t get financing. Today, just the opposite is the norm. Those factors contributed to a greater than fourfold increase in lease originations between 2009 and 2016.7
So, what makes leasing a car worth it? What are the advantages of leasing a car—the appeal of leasing to consumers? And what are the pitfalls?
As consumers weigh the pros and cons of leasing versus buying a car, most still buy but leasing has grown significantly in recent years. If leasing appeals to you, you likely have further questions about what leasing a car really means, and how to best go about doing it. Understanding both is important before you start shopping.
1 “Leasing Plateaus After Four Years of Growth,” Edmunds Media
2 “Pros and Cons of Leasing vs. Buying a Car,” The Balance
3 “Buying vs Leasing a Car,” U.S. News & World Report
4 “Why Millennials Love Auto Leasing,” NerdWallet
5 “Millennials Coming of Age,” Goldman Sachs
6 “2018 Used Car Market Report and Outlook,” Cox Automotive
7 “2017 Used Car Market Report,” Cox Automotive
8 “H1 2016 Lease Market Report,” Edmunds Media
9 “State of the Automotive Finance Market, Experian