A Helpful Comparison On Car Leasing Vs. Buying

By Cynthia J. Drake. May 7th 2016

To buy or not to buy?

This is an age old question many consumers face when it comes to shopping around for a new car. With appealing financing offers for buyers as well as solid leasing deals, it's no wonder that more than a few people have hit the brakes when it comes time to decide on auto ownership.

According to Cars.com, 70.5 percent of people decide to finance their cars, 18.5 percent lease and 11 percent pay for their cars with cash.

Here's a guide to help motor through that tough decision and get you rolling down the freeway.

How Important Is Driving A New Car To You?

If nothing gives you a bigger thrill than that new car smell and a gleaming, fresh-from-the-factory dashboard with all the bells and whistles, leasing might be your best option. Every two to four years, depending on your terms and assuming you've kept your car in good condition with only reasonable wear and tear, you can turn in the keys and jump in your latest and greatest ride.

Do You Take Pride In Car Ownership?

Some people take great pride in paying off their car loan and driving around in a vehicle that they own. Others like that ownership allows them to modify their car as they wish. Want to paint a large skull and crossbones on the driver's side door? Are you dying to tinker with your car engine to add some more horsepower? You can if you own your car. Not so if you lease.

How Much Cash Do You Have Available?

Lease payments, which generally mirror the depreciation of your car, are usually much lower than payments you make toward a car you purchased. If you can't afford larger payments or you prefer to keep your cash reserves in a place where your money is earning interest, a lease may be the way to go. Lease calculators, like one from SmartMoney, can help you determine if you might be better off in the long run leasing and investing your excess money.

How Much Do You Drive In A Given Year?

If you drive more than the typical lease allows (which is usually between 12,000 and 15,000 miles per year), you may end up paying out-of-pocket for any extra miles that you drive. The charge for extra miles can be somewhere between 5 to 20 cents per mile. Charges for going over your allotted mileage can easily rack up and have you nervously keeping an eye on that odometer every time you get into your car. The bottom line is that if you put a lot of miles on your car, ask yourself how realistic a lease may be for your current commute.

How Well Do You Take Care Of Your Cars?

If your cars usually bear the telltale bruises of one too many run-ins with a shopping cart or an explosion of Cheerios in milk in the backseat, you will have to keep in mind that you may end up paying for returning your car in less than pristine condition at the end of a lease. Therefore, you might consider buying if you are concerned about paying for non-wear and tear damage to the vehicle.

On the other side of the coin, SmartMoney advises that "you should consider buying if you keep your car in immaculate condition. That way you can build up some equity and take advantage of its spotless interior or any improvements you've made when it comes time to sell."

How Much Does The Car Cost?

If you decide to lease, you may think that the sticker price of the car does not matter. Nothing could be further from the truth. Your lease rate is based on the price of the car. If you decide to lease, keep in mind that you can and should negotiate with a car dealer over the size of the lease payment. Discounts and rebates should also apply.

If you decide to buy the car, there are also ways to make sure that you get the best deal. (To learn more, see 6 Easy Tips For Getting The Best Deals On Car Financing.)

Do You Use Your Car For Business Purposes?

If so, you might receive a better tax break by leasing your car, according to an article from SmartMoney. "Interest paid on loans to purchase a car is not deductible. But when you lease, you can deduct depreciation as well as the implicit financing costs," says the article. (For more information, see Use Your Car For Business And Get A Tax Break.)

Owning or leasing a car is a big decision. In order to make the best choice, you will need to take many factors into consideration. Keep in mind that there isn't one cut-and-dried answer for every person because preferences and financial situations vary. However, if you are honest with yourself in determining your needs, you should be able to come to a decision that makes you comfortable.


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