Should You Buy Your Leased Car? | The Budget Mom (2024)

FAQs

Is it smart to buy a car that you have leased? ›

Only go ahead if you are getting a great deal on both the lease and the payoff amount. If it would be cheaper to buy your car upfront, or if you think you'll want the car for a long time, skip the lease. Just buy a car directly instead.

Unless you habitually buy and sell cars every couple of years, taking out a loan is probably the more cost-effective approach. This is because even though you've paid less during those first few years, you have no equity in the car when the lease expires.

A general rule of thumb is no more than 20% of your take home pay.

Financing a car means you get to keep it when it's paid off, but leasing means you have to give it back. Having a car means other monthly costs, so make sure it's in your budget and don't borrow more than you can afford.

When your leased car's trade-in value is greater than the residual price you'd have to pay to buy it at lease end, you have equity. Equity at the end of a car lease could help you cash out or get a good deal on purchasing your current vehicle, or buying or leasing a new one.

In 2024, lease returns are expected to rise then fall. Experian predicts, “retail leasing returns will rise to 1.1 million in the second quarter of 2024, but then fall to only 640,000 by the end of that year.” So, if you're hoping to buy a pre-owned car in 2024, look around April to early summer for the best selection.

In 2024, whether to buy or lease a car depends on your individual needs and lifestyle. With manufacturers pushing more attractive lease deals, leasing may become a more appealing option for many. Leasing is a great way to avoid the worst effects of today's high interest rates.

on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000. And at 150 k salary, that means your max car price should be 50 2500.

How much should I spend on a car if I make $60,000? ›

How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.

The rule is to make a 20% down payment on a four-year car loan and spend no more than 10% of your monthly income on transportation expenses. Because your credit score affects the size of your monthly payment, you may need to buy less car if you have a lower credit score.

The major advantages of leasing include: You drive the car during its most trouble-free years. You're always driving a late-model vehicle that's usually covered by the manufacturer's new-car warranty. The lease may even include free oil changes and other scheduled maintenance.

You won't have to worry about mileage restrictions or possible additional charges for things like wear and tear. Although buying or financing your vehicle through a loan takes some extra homework, you will have full control of the vehicle and can sell or trade it in at any time — a benefit that leasing cannot offer.

Instead of leasing, motorists are increasingly financing new-vehicle purchases for longer periods to help keep monthly payments low. Nearly one out of every five new-car shoppers now takes out a seven-year auto loan to finance the cost.

Buying a car may seem more expensive than leasing, but in the long run, it's the other way around. “Buying a car typically involves a higher upfront cost, but over time, the owner builds equity in the vehicle and can potentially recoup some of those costs when reselling,” said Turley.

You're a Low-Mileage Driver

If you typically log between 10,000 and 15,000 miles per year, leasing a car might make more sense than purchasing one. Just be aware that if you exceed the mileage listed in your contract, you could be charged a hefty fine at the end of your term.

In other words, a vehicle lease agreement can help you build credit in the same way an auto loan can. As long as your dealer or leasing company reports to all three credit bureaus—Experian, TransUnion and Equifax—and all your payments are made on time, an auto lease can certainly help to build your credit history.

The lease payoff amount is the total sum to pay if you want to buy the car before the lease contract expires. This includes its buyout price and the equivalent of the remaining payments due until the leasing period expires, plus a car purchase fee in some cases.