Lease, New or Used: A Modern Consumer Car Cost Comparison

oldcarBuying a car is one of the most important financial decisions an individual can make it their lives, and factors including convenience, reliability, security and luxury all come into play. Below is a comparison of the key differences between each option to help you discover which is the best choice for you.

Buying New

There are several benefits to buying a car new. There is the excitement of first time ownership and the access to the latest technology, luxury and safety that it confers. New cars are under factory warranty and there’s little risk of high repair costs. Warranties will typically last one to three years, during the course of which the dealership will cover the costs of damages or part replacements.

Most new cars also have a better fuel economy rating than older versions. The additional miles per gallon may prove very handy if you need to fill up a significant amount on a monthly basis.

Make a rough estimation of your monthly miles per gallon before making your choice. For a lower fuel cost, go with a smaller engine. The most obvious downside of new cars is their cost, which will most often be considerably more expensive than a used car. However, the yearly costs of maintaining a used car, especially an older and less reliable vehicle, may be higher.

Check the maintenance and insurance records when buying a used car, and look for issues the previous owner may be trying to hide from you. A new car may have repair costs that aren’t covered under warranty, so make sure you read the fine print. New cars also suffer a first year depreciation typically around 11% and then a 15 – 25% annual depreciation rate.


Leasing is another way of enjoying the security of being under factory warranty as well as the satisfaction of being a first time buyer of a new vehicle. Leasing offers lower monthly payments than outright ownership, down payments are low and you keep the car for less time, which can be useful if you don’t use it very often.

The lease agreement can be complicated, however, and it is important to research residual value and other relevant concepts before agreeing to anything. Upfront costs, such as taxes and fees, are often high. There are expensive fees for people who wish to use the vehicle outside of their lease agreement – for example exceeding the mileage limit – and the cost of purchasing the remainder of the vehicle can be higher than market price.

You should be sure you’re happy with the car before agreeing to a leasing agreement, as backing out of one half way can be very costly. Avoid leasing if you drive considerably more miles than the agreement is offering, if you’re not confident that you can take sufficient care of the car to avoid charges for repairs, or if you calculate the upfront costs to outweigh the benefit of monthly payments.


You can get a great deal on a used car if you’re willing to do the research. Not only is there far greater range and competitive prices, but you can get driving with minimal paperwork. Luxury brands are more affordable when used, and often have better safety standards than other used cars. That being said, don’t fool yourself into getting overexcited about an old model from a famous brand. A 90s Audi is not an Audi Q7. The financial value of vintage and collector vehicles can also increase if you maintain them well, so it can be an investment as well as a purchase.

Make sure you can source replacement parts for foreign vehicles, and be especially cautious when considering older cars from defunct manufacturers. Many people are uncomfortable at buying a used car, however. Support can be very minimal or non-existent from the manufacturer or the person who sells it to you.

The more casual the online marketplace, the less reliable the seller. A professional used car sales website is generally preferable to a classified website because they have accreditation and reputation systems. As a rule of thumb, steer clear of cars with deferred maintenance and repairs unless you know what you are doing, as the problem is often deeper than it appears or is presented to you. You should always check online reviews of the seller and the model when available.

Whatever your final decision, it’s essential that you know what you want and plan for whatever future you envision with your car. How long do you want the car for? Do you intend to sell it eventually, or pass it on to someone else? Finally, the ultimate question: is it within your budget now and into the near (i.e. 5 year) future?

Marco Marlia works in his family-run car dealer business. Slowly learning the ropes since he was a teenager, Marco now runs day-to-day operations. His auto focused articles appear on personal finance blogs.

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