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Leasing Versus Buying
It's a common dilemma: Should I lease or buy a car-- which is better?
There is no single answer. Although leasing may give you a lower monthly
payment, the total costs are usually more expensive than buying. You
should avoid leases longer than 36 months. When you lease, you are paying "rent" on your vehicle. At the end of the lease term, you will have nothing except
the issue of turning in a leased vehicle, which can be unpleasant, with disputes
over penalties for unusual wear and tear.
In the final analysis, whether you buy or lease depends on your situation and
what is most important to you. So, when making a 'lease or buy' decision,
look at your personal priorities as well as the financial comparisons.
Read the statements below; if you agree with them, then leasing might
be right for you!
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It is more important to me to change cars often and always have a late model
car than it is for me to build equity in a vehicle.
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I keep my cars in great condition.
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I know how long and how far I will drive my vehicle.
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I have a steady income and the possibility of a lower income is unlikely
in the future.
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I drive less than 15,000 miles per year.
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I do not plan on moving to another state.
Now read this set of statements. If you agree with these, then buying a
car might be right for you!
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I drive more than 15,000 miles per year.
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I tend to hold onto cars for more than five years.
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I like the idea of ownership.
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I like to customize my car.
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I want my money to build up trade-in or resale value.
LEASING VERSUS BUYING: A SHORT SUMMARY
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When you buy, you pay for the entire cost of a
vehicle, regardless of the mileage you use. Assuming you are not paying cash,
you usually make a down payment, pay any sales tax in cash or roll it into
the loan, and pay an interest rate determined by your lender based on your
credit history. You make your first payment a month after you sign
your contract.
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When you lease, you pay for only a portion of a vehicle's
cost, the portion you use during the lease term, plus other fees. In
most states, you pay sales tax only on your monthly payments (with exceptions),
and you pay a financial rate called a money factor that is similar
to the interest rate on a loan. You may also be required to pay special
lease-related fees such as capitalized costs, deposits and higher insurance
costs. You make your first payment at the time you sign your contract — for
the month ahead.
Click here for a real-life Lease vs. Buying example.
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