There are a lot of decisions to make when shopping for a used car. Should you buy a used car? Maybe you want a new one? Should you rent or buy? How does renting a car work?
Even though buying a vehicle means higher monthly payments and requires more upfront cash, do your math, and you’ll see that in most cases, buying a lightly used vehicle makes more financial sense in the long term. However, the long term does not interest everyone, and there are situations where buying a vehicle is not the best option.
Here’s why we’ve compiled the pros and cons of renting or buying a car.
How does renting a car work?
Leasing a car is similar to the concept of long-term leasing. This involves an agreement with a rental company that allows you to drive a vehicle for several kilometers and a fixed monthly payment. This does not mean that you cannot exceed the mileage granted; however, if you exceed it, you will have to assume additional costs at the end of your rental.
Unlike financing a vehicle, your monthly payments do not create equity. There are several elements of a lease that you can negotiate, including your monthly payment, your interest rate, the number of miles you can drive, and the remaining residual value at the end of the lease, which you decide to buy it.
Advantages of renting:
Owning a vehicle is expensive, whether it’s new or used, and leasing is a way for many people to reduce monthly car operating expenses.
Renting a car is a good option for you if: You like to change your car regularly: If you quickly get bored of your cars and enjoy driving the newest models with the latest technology and features, then car rental is the right option.
You love driving a new car: Many people just can’t afford to buy the car they want. Since lease payments are often lower than finance, many drivers can drive a fancier vehicle than they could buy.
Monthly payments are a major concern: Monthly expenses are a big concern for most people, and it can be difficult to add additional expenses to their budget. Leasing makes it possible to drive a brand new car for smaller payments than if they had simply purchased it.
You don’t have to travel long distances: People who don’t drive long distances don’t have to worry about the mileage the rental gives them and possible overages.
The advantages of buying:
As discussed before, buying a lightly used car is less expensive if you plan to keep it for more than a few years.
If you have enough money in the bank to pay cash for your car, this will give you some bargaining wiggle room when negotiating the price.
Buying a car is usually a good option for you if: You plan to keep the same car for the long term: You can take advantage of the time without payments, and when it comes time to change, you can use the vehicle as an exchange which can help in price negotiation or make a down payment on your next acquisition.
You want to modify your car: Buying is your option if you are into vehicle modification. If you are renting a car, you will have to reverse all modifications before the end of the rental, which means that you will have thrown all the money spent on modifications out the window.
Overall, it depends on your priorities, financial situation, and preferences.