With a child heading off to college, you might want to ensure they have a solid means of transportation. Leasing vs. buying a car for a college student offers many benefits among them less money out of your pocket each month.
However, like most things, it’s bit more complex than that.
How Leasing Works
For the uninitiated, leasing a car is basically renting it on a long-term basis. You’ll shop for the car, same as you would if buying it. However, you’ll do so on behalf of the company from which you’ll lease the car. The monthly payment will be based upon the sale price, less your down payment, less what the car is expected to be worth at the end of the lease (the residual value).
You’ll agree to keep the car in good condition, make no changes that can’t be reversed and to drive the car no more than 36,000 miles (on a three-year lease). These stipulations are designed to help the car retain as much of its original value as possible when the lease runs its course.
At the end of the lease, you’ll return the car and get another one if you’d like. You’ll also have the option of buying it at the residual value, or selling it, paying off the residual and keeping whatever money is left.
Advantages of Leasing for Your Student
Assuming your child will be in school for four years, leasing vs buying a car is a good way to put them in something with which they won’t have any mechanical issues. After all, the duration of most new car warranties is 36 months. They should be able to get through a fourth year with no worries, if they take good car of the car.
Meanwhile, you’ll have put them in a car with more modern safety features and conveniences at a lower price. You’ll also be freed of the worries of mechanical issues. Many new car warranties include roadside assistance too. Failing that, get them a AAA card and you won’t have to worry about dealing with flat tires either.
In other words, you’ll free yourself of most of the worries of giving a child a car.
Advantages of Buying a Car for Your College Student
Kids will be kids, so while they do understand they need to keep mileage within reason, their friends are going to talk them into driving to out of state football games. Good luck with convincing the average teenager to keep a car in pristine condition too. Moreover, inexperienced drivers tend to hit things, so that leased car could take quite a beating.
None of these will be of financial consequence if you buy the car.
Moreover, insurance will cost less, as you’ll be required to carry the maximum coverage on that leased car. Buying the car will also mean they’ll still have one when they graduate one that is likely to be either paid off, or close to being so. A leased car will have to be turned in.
So Which Approach is Better?
At face value, buying a car would seem to be the smarter play. However, you will be dealing with higher monthly payments. That additional money could instead go toward tuition to minimize the impact of student loans with a lease.
Bottom line; leasing vs buying a car for a college student can save you a lot of money and headaches if your youngster has proven responsible. However, leasing will ultimately be more costly should you decide to keep the car, or if your offspring tends to be on the less cautious side.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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