Buying or Leasing Your First Car: Which Is Better?

When I recently spoke to a group of college juniors and seniors, one question stood out: “Is it better to buy or lease my first car?” It’s a great question, and the answer depends on your priorities. Leasing has its appeal—driving a shiny new car, the convenience of upgrading every few years, and predictable monthly payments. But let’s be honest: you’re paying a premium for that convenience.

For young people getting their first vehicle, especially those on tight budgets, leasing is rarely the best financial move. Here’s why—and what you should do instead.

Why Leasing Isn’t Ideal for Your First Car

Leasing is typically reserved for new vehicles, and with new cars come higher costs. Not only will you face a higher monthly payment compared to a used car loan, but you’re also locked into mileage limits, which can lead to hefty fees if you drive more than the lease allows. At the end of the lease, you don’t own the car—so you’re effectively paying for the privilege of using it temporarily without building any equity.

For someone just starting out, leasing a new car can strain your finances. Every dollar going toward a lease payment is one less dollar you could be saving or investing in your future.

Why Buying Used Makes More Sense

Instead of leasing, I recommend buying a used vehicle, especially one that’s 3-5 years old—or even up to 10 years old if your budget is tight. Here’s why:

1. Lower Costs: Used cars have already experienced their steepest depreciation, meaning you’re getting more value for your money.
2. Financing Options: Most used car lots offer financing, and your bank or credit union will often have better loan rates for used vehicles compared to dealerships.
3. Ownership: When you buy, you own the car outright after your loan is paid off, and you can drive it as much as you want without mileage restrictions. This said, when you do finally sell or trade in that 10+ year old vehicle for a newer model, don't expect too much. (I was recently offered $1,500 for a 12 year old high mileage car.)
4. Utility Value: The most important factor when buying your first car is its utility value—how well it meets your basic needs.

Focus on Utility, Not Luxury

Your first car doesn’t need to be flashy. It just needs to get you to work, school, or wherever life takes you. A reliable used car can do that without putting undue pressure on your finances. Once you’re earning more, have built some savings, and have greater flexibility in your budget, then you can start thinking about upgrading to a nicer vehicle.

Once you're making bank, have all debts paid off and have a large budget surplus every month, after savings, charity, etc. that's the time to lease the Ferrarai;)

The Bottom Line

For most young people buying their first car, the smart move is to aim low and focus on the basics. Prioritize utility, reliability, and affordability. By buying a used car, you’re setting yourself up for financial success down the road, saving for bigger goals, and avoiding the unnecessary costs that come with leasing.

So, to the college student weighing their first car decision: save the dream car for later. For now, think smart, buy used, and drive into your future with confidence.