Aside from buying a new home, buying a new car can be one of the most stressful purchase events in your life. 

Your first decision is the model and make. Minivan or sport utility vehicle for a growing family? Maybe a sedan or a crossover will work? What about an electric car? How about all those features such as satellite radio, backup camera, side camera or anti-collision braking?

Once you’ve settled on what you want, then it’s time to decide whether you lease or buy. Both paths have their pros and cons. But the ultimate answer depends on your lifestyle and budget. 

Pros of buying a car 

Edmonds gives a good rundown of the benefits of buying your car. If you finance the vehicle, you own it outright once the loan is paid. If you regularly maintain the vehicle and keep it in good shape, it can last a long time. Unlike with leasing a vehicle, you aren’t constrained by mileage limitations. 

You can drive it for a few more years, and bank the money you were making on loan payments in savings or investments. Or you can apply the funds to paying down other debt. 

Buying a car gives you access to a lot of incentive deals from the manufacturer. December is the best time of year to buy a new car If you’re the shopper type looking to gain the best advantage, according to Edmunds, one of the oldest automotive industry resources. Edmunds notes that the year’s highest discount of the manufacturer’s suggested retail price, 6.1 percent on average, come in December along with the highest number of incentives. 

At the end of the calendar year, dealers seek to clear their inventory of prior year cars to make room for the next year’s models. They also want to end the year on strong sales. 

Cons of buying a car

When you finance a vehicle, you are pretty much stuck with it and the payment until the loan is paid. If you decide to sell the car before the loan is paid, you will have to make up the difference between the loan value and the vehicle’s value. The same situation happens when you trade the vehicle for a new one before the loan is paid. 

To avoid being upside down on the loan (owing more on your loan than the vehicle is currently worth), you would need to put down a big chunk of money on the front end. But that’s not desirable for buyers who prefer to keep as much cash in their pockets as possible. 

You have to remember that when you buy a vehicle, you are buying an asset that depreciates. According to Carfax, a car loses 10 percent of its value as soon as you drive off the lot. Your loan value stays the same. 

By the end of the first year, the car depreciates another 10 percent, Carfax shows. That’s an average. Some cars, according to Carfax, can lose as much as 50 percent of their value. “On average, a new car will lose 60 percent of its total value over the first five years of its life,” Carfax notes. 

Once the vehicle’s basic warranty runs out, the repair costs shifts to you, unless you buy an extended warranty. You can push that cost out by purchasing a vehicle with the longest possibly basic warranty. Some manufacturers offer five-year, 60,000-mile basic warranties. Cars.com offers a handy guide to help you compare what the different auto companies are offering.

Pros of leasing a car

If you like to drive a new vehicle every few years, nearly every automotive expert says leasing is the best option. It gives you the opportunity to drive a better car and for less money than buying.

You can time the trade out within the warranty terms. Most manufacturers have been offering at least three-year, 36,000-mile warranties, which coincides with the typical three-year auto lease. 

With leasing, monthly payments tend to be more affordable than buying because you’re paying for the vehicle’s depreciation rather than its full cost. A dealer determines the residual value – the vehicle’s projected value at the end of the term. Unlike with buying a vehicle, having that value predetermined actually protects you from a big dip in depreciation.

A vehicle that depreciates more than one that doesn’t will result in a higher monthly payment. For example, a car priced at $25,000 that is valued at $12,500 at the end of a 36-month lease would put your monthly payment before taxes and fees at about $347. But if the residual value is a $15,000, a 40-percent drop versus a 50-percent drop, the monthly payment comes to about $277. 

Do your research and find a vehicle that holds its value the best. According to The Finance Genie, mid-sized sport-utility vehicles, mid-sized pickups and full-sized SUVs hold their value the best. 

Cons of leasing a car

Your mileage is almost always limited. The mileage is predetermined in the lease. You’re on the hook for the mileage if it exceeds the level in the lease, which means writing a check at the end of the lease. 

You also can be dinged for excessive wear and tear on the vehicle. That means another check to write if the dealer believes the wear and tear exceed what is typical for the lease term. 

And the big one is you don’t own the vehicle at the end of the lease. Of course, that one doesn’t matter if you roll from lease to lease because you want to drive a new vehicle every few years. 

But let’s say you like the vehicle and want to keep it. Its price is already set because of the residual value. If that value is higher than the vehicle is worth, that’s not a good deal for purchasing. That said, the buyout cost at the end of your lease can be negotiable, especially if you come armed with current values for your exact model from Kelly Blue Book. 

The decision to lease or buy basically comes down to how often you like to swap out for a new car, how much you want to pay in monthly payments and for how long. Each has its advantages and disadvantages. But buyers can easily do a cost-benefit analysis to determine which is best for them for their budget.