Purchasing a Vehicle: Buying New vs. Leasing. vs. Buying Used

Last year, for the first time since I was 20 years old, I purchased a new car. Well, more accurately, my wife and I bought a new to us car. Prior to landing on this decision, we considered different routes for replacing our aging sedan — including buying a truly new vehicle or even leasing one. Naturally, this question led us down a research rabbit hole as we attempted to make our final decision.

So what method is best and will save you the most money: buying new, leasing, or buying used? Let’s take a look at some of the pros and cons each option offers.

Buying a New Vehicle


Warranties and protections

One of the best parts about buying a new car is that it’s, well, new. While this doesn’t exactly guarantee you won’t run into mechanical issues, it’s pretty safe to say that the likelihood you’ll need to make repairs in the near future is diminished. For those looking for peace of mind and something reliable that they won’t have to pour more money into, this can be a major plus.

On top of that presumption of quality, new vehicles will typically come with some sort of warranty that will make things right should something go wrong. That said, it’s important to pay close attention to what is actually covered by these warranties and what you need to do in order to keep these policies valid (hint: often times it will mean sticking to the manufacturer’s strict maintenance schedule). Still, this type of protection is something that new car buyers are often attracted to.

Potential financing offers

Remember after September 11th when many of the major auto manufacturers offered 0% financing on their vehicles? While that kind of wide-spread offer may be long gone, it is possible that, as the saying goes, “well-qualified buyers” may be able to secure preferred financing terms. Considering how large new auto purchases can be, any percentage you can shave off your interest rate could make a big difference to grand total cost.

New car smell/customization

Okay, I may be joking about the new car smell (for the most part, but there are some things to be said about having a brand new, never driven vehicle to yourself. For one, in many cases, you’ll be able to dictate exactly which optional features and upgrades you want. Similarly, since you own the car (aside from the lienholder, that is), you’re welcome to indulge in after-market upgrades and additions as well. That way, you can create the car you’ve always dreamed of.


Cost and depreciation

As cliche as it may be, it’s true that the value of your car begins to decrease the second you drive it off the lot. What’s worse, it doesn’t stop there. According to CarFax, a vehicle may lose 20% of its value within the first year and then shed another 10% annually for the subsequent four years. That can amount to a huge loss if you plan on trying to sell your car — even potentially putting you “underwater” if you choose to finance (meaning you actually owe more on the vehicle than its worth). Obviously that’s not a great position to be in, yet it’s become a way of life for many Americans.

Higher monthly payments

When comparing the monthly costs between buying and leasing a car, it’s clear the latter looks “cheaper” on the surface. Even if you elect for a loan with longer terms (60 or even 72 months), chances are you’ll still end up making payments that are larger than when leasing. As you’ll hear me say a couple of times in this piece, though, make sure you do the long-term math before letting monthly payments alone dictate your decision.

Leasing a New Vehicle


Lower monthly payments

I’ll admit that, at least when I was younger, I’d sometimes see commercials for luxury cars on TV and be shocked by just how affordable they made them sound. Well, as it turns out, that’s because those quick offers tagged onto the end of such ads are often advertising lease options. Indeed, leasing a vehicle can mean making monthly payments far lower than they would be if you had chosen to buy. We’ll get to the “buts” later but, for now, there’s no denying the appeal of this proposition.

Warranties and protections

Just as new cars typically come with factory warranties, the same is often true of leased vehicles. And, once again, most drivers probably feel more confident about the reliability of the new, leased car then they do about a used one. In fact, as we’ll get to to in a moment, these benefits are actually heightened when it comes to leasing since you can continually keep hitting the refresh button on your warranties as you trade-in for new leases in the coming years.

Newer cars more often

Lastly, perhaps the largest advantage leasing has in the eyes of supporters is that it allows drivers to essentially upgrade their vehicle every few years. If I can get anecdotal for a moment, I want to share a story about a friend who ends up buying a new car every couple of years it seems. What’s more, to an untrained set of eyes such as mine, it seems like there’s nothing actually new about each of these vehicles since he tends to just get the latest model of the same Jeep. Anyway, I’ve often wondered why, if he’s upgrading with such regularity anyway, he doesn’t just lease (we’ll get to his answer in a moment).

Overall, I’d say that, if you’re the type of person (like my friend) who enjoys driving a late-model car and doesn’t want to worry about the issues that come with an aging vehicle, leasing may just be your best option.


Not actual ownership

It goes without saying but, when you lease a car, you don’t really own it. When your lease is up, you’ll need to return it to the dealership (or you may have the option to buy it at that point). Meanwhile, when you own a car, you may be able to continue driving it well after your loan is paid off. Depending on the driver, this can be a dealbreaker as they see more value in the long-term than the short.

Funny enough, even though my friend does tend to trade up his vehicles instead of driving them to the end of their useful life, he says the fact that he wouldn’t actually own his Jeep strikes him as strange. So, for him, it seemingly makes sense to stick with buying.

Possible mileage restrictions

Looking forward to taking out your newly-leased car out for a cross-country roadtrip? Well, you may want to read the terms of your contract first. That’s because many leases put restrictions on the number of miles you can put on the car. Going over these limits might result in a penalty when you go to return the car at the lease’s end. Therefore, those who want to put the “open” in “open road” may want to reconsider leasing.

Keeping it in good condition

I don’t expect that anyone (with the possible exception of YouTube pranksters) obtains a new vehicle and set out to let it deteriorate. Alas, things happen and keeping a car in perfect condition can be a tall task. Why do I bring this up? Because, if you’re leasing, you may be held responsible for any damage done to the car outside of what the dealer considers to be reasonable wear and tear. This probably shouldn’t come as a shock to anyone who’s ever rented an apartment but it’s still something that needs to consider when looking at your vehicle options.

Buying a Used Vehicle


Less expensive than buying new

This is probably obvious but, except for a few rare cases (such as classic cars), purchasing a previously owned car is more affordable than buying a new one. Moreover, a large chunk of the depreciation that new vehicles endure may have already come off the vehicle, making it a “better buy” overall. For that reason, it’s easy to understand why many personal finance experts tend to prefer this option over buying new.

More purchasing options

Have you ever stopped to consider how strange it is that you can pretty much only purchase a new car directly from the limited number of dealerships that exist? It’s kind of crazy when you think about it. Thankfully that’s not really the case when it comes to buying used. In fact, the number of outlets for purchasing used vehicles has been growing in recent years.

In addition to buying previously owned vehicles from dealerships that either traffic exclusively in used cars or sell both new and used, there is always the option for purchase via private sale as well. These types of “peer to peer” transactions are now often facilitated by several mediums, including Facebook Marketplace, Craigslist, and more. On top of that, you can also go the route I did and try a service like Carvana. This allowed me to purchase my vehicle online and pick it up at one of their increasingly iconic car vending machines (they also offer free delivery in select markets).

Clearly, when it comes to buying used, you have several options to consider.


Factory warranties may have expired

Admittedly, buying a used car does come with a bit of risk. Part of that comes from the fact that, in many cases, the warranties that originally came with a car may have expired. Thus, the new buyer may be on the hook for any issues that may arise with the vehicle after it enters their possession. However, I should mention that some used car sellers — including some “certified pre-owned” dealerships — may offer their own limited warranties to help put you slightly more at ease about your purchase.

Financing rates may be higher

Tell me if this sounds as strange to you as it did to me the first time I heard it: it’s usually cheaper to finance a new car than a used. Now, I don’t mean that the total loan amount is lower, but the interest rate you’ll pay to finance a used vehicle is typically higher. On that note, you may also be forced to accept shorter loan terms, meaning that your monthly payments may not be that much lower than buying new (although you’ll pay off your loan a year or two earlier). Ultimately, while these realities can both be turn-offs, you’ll want to be sure to run the overall math instead of letting the monthly payment alone scare you off.

Fewer (factory) customization options

Finally, one disadvantage that those buying used have is that they don’t have the luxury of dictating the exact features they want in a vehicle. While they’re welcome to search for their perfect vehicle, stacked with all of the options they wanted, it’s not exactly the same as selecting such packages when you’re buying new. At least they can take solace in the fact that they can choose all the after-market customizations they want!

Despite what you may have heard, there are legitimate reasons why someone might elect to buy a new car or lease a new car instead of purchasing a used one. Nevertheless, in my case, buying used made the most sense for us because we plan on driving our car for many years but didn’t want to pay the premium required to buy new. As for my Jeep-loving friend, honestly, I still think he’d do best to lease. All this goes to show that, when it comes to getting a new (or new to you) vehicle, you’ll need to consider the pros and cons for yourself to determine which option will actually save you money in the end.


Kyle Burbank

Kyle is a freelance writer and author whose first book, "The E-Ticket Life" is now available on Amazon. In addition to his weekly "Money at 30" column on Dyer News, he is also the editorial director and a writer for the Disney fan site LaughingPlace.com and the founder of Money@30.com.

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Buying a good quality used car is a great option, and when you are planning to resell it again, there’s only little depreciation on your part.

Leasing a car is a great option if you want the latest models with less trouble of selling your old one and buying a new one.

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