I just bought a new car. Congrats to me! It was a big decision, and I want to share why I chose to buy instead of lease it. It wasn’t as easy to figure out as I thought, so you might find this helpful!

The whip

For my daily commute, I needed something that was reliable and comfortable. I settled on a Honda Accord (timeless, stunning). Because I’m just using it for commuting, I didn’t want anything fancy. I found a used 2022 model for $30,000; new ones are about $40,000. Hondas are known to be super reliable, so I was pretty confident I could drive this for a long time without any major issues. 

Monthly Payments & depreciation

If I was to lease the car, the monthly payments would have been lower. But if I bought, I’d be paying to own the car. Owning assets is good…sometimes. Cars are usually depreciating assets, meaning they lose value as they get older because of wear and tear. 

I financed my car at an 8% rate. This means I am paying interest on the loan. Even though my payments are higher (more than twice as much as my lease payment would have been), I like knowing that each payment gets me closer to owning the car.

Since the car I bought is a couple years old, a huge chunk of the depreciation has already been taken out of the value of the car. It’s not going to lose value as quickly as if I had bought a new car, so my all-in cost is actually lower than leasing. 

Here’s a breakdown of the net cost of buying vs leasing for me: 

In the end, when considering depreciation and all the costs, buying is about $2,500 cheaper!

Mileage Limits

I’m driving the car twice a day, five days a week at least. Leasing a car usually comes with mileage limits; mine would have been 15,000 miles. With my commute of 21 miles each way for work, I probably would have stayed in this limit. But if I added in any road-trips, I would have gone over - so buying made more sense. I wanted the flexibility to drive as much as I wanted.

Cost Over Time

Leasing can be cheaper in the short term, but buying can save money in the long run. Since I plan to keep my car for many years, buying was a better choice for me. Even though my financing rate is 8%, I will own the car after paying it off. Over time, I will save money because I won’t have to make payments forever.

Takeaways

Here are some things to think about when deciding to buy or lease a car:

• Monthly Payments: Leasing usually means lower payments. But buying means you are working towards owning the car.

• Ownership: Buying means you own the car. Leasing means you have to give it back. Keep depreciation in mind! Buying something a couple years old will save you a lot.

• Mileage Limits: Leasing often has mileage limits. Buying means you can drive as much as you want.

• Cost Over Time: Buying can save money if you keep the car for many years. Leasing might be cheaper in the short term.

In the end, I chose to buy my 2022 Honda Accord because I wanted to own it, the cost was actually less on a net basis relative to leasing, and I wanted to drive as much as I want. Plus, I plan to keep it for a long time. I hope this helps you decide what's best for you!