Why You Should Never Rent a Car
In the current inflationary hellish landscape of the automotive market, you may see some advice that leasing is the solution to your car buying problems. Wouldn’t you rather drive a shiny new car with a lower monthly payment than finance a car, even if it means you own it someday? While leasing a car can have positive effects, it is not a smart financial move for most people. Here’s what you need to know about buying and renting a car and why leasing is probably not in your best interest in the long run.
Buying or renting a car
Buying a car means that you own it and accumulate capital through monthly payments (if you finance the purchase); Leasing essentially means that you rent a car for a specific period of time ( usually two to five years ).
The most obvious difference between renting and buying is ownership. When you rent, there are limits on how long and how far you can drive your car. You will always have monthly expenses and no control over your ride modifications.
Of course, leasing has some appeal; namely, leasing usually includes lower initial costs and lower monthly payments. Many people are also attracted to leasing because they prefer to have a new car every few years at the end of each lease term. Despite these obvious benefits, leasing tends to get a bad rap.
Why car leasing is the wrong move
For most drivers, car rental benefits aren’t worth the thousands of dollars you’ll spend on an asset you won’t own. Yes, your monthly payment may be lower if you rent rather than buy. But as our sister site Jalopnik explains , the main promise of leasing is often misleading: when you look at the total costs of those monthly payments, leasing can cost you more than buying a new car right away.
Do the math and see that lower monthly payments will actually hit you harder over time. And when I say “calculate for yourself”, I certainly mean “use a reliable online calculator”. Here are some leasing calculators to help you understand what your financial decision looks like in the long run:
- The Dinkytown buy or lease calculator includes factors such as annual depreciation, loan and rent fees, and the interest you can earn on the money you save on rent.
- The Bankrate Auto Calculator is another useful tool that allows you to enter data such as how well you service your cars and what your credit score is.
While the overall cost in the long run is the main disadvantage of leasing, there are other notable disadvantages. For example, according to Money Under 30 , the annual cost of car insurance for a rental car is usually higher than for a car you own.
There’s also cause for concern when it comes to the fine print, such as the hidden fact that you can pay personal property tax on a car. Similarly, at the end of the lease term, you may face unexpectedly high depreciation costs.
And of course, your mileage is limited when renting a car. If you know you’re driving over 12,000 or 15,000 miles a year , leasing is out of the question.
Experts usually say that leasing is a concern that is rarely worth the cost and that buying is the best long-term financial solution. And if you must buy a car right now, your best bet is to opt for something used so you don’t have to pay both interest and sudden depreciation. Your decision will depend on your budget and your driving needs, but the general consensus remains that buying a car is smarter than leasing.