Should You Lease or Buy Your Next Car?

Many people are faced with this question when the time comes to get a new car. By some estimates, leasing vehicles has increased 30% in the past 10 years. Leasing is becoming more popular and can be confusing. Both buying and leasing have their advantages and disadvantages and one should be aware of what those are before making a decision. Leasing a car is appealing to many because you get to drive a new car for lower monthly payments than if you bought (or made payments) on the same car. This is because you are only paying for the three or four years (or however long you lease for) worth of depreciation versus paying for the whole car. For this reason, many people choose to lease a more expensive car than they could afford to buy. Another lure of a lease is that in three or four years you are free to turn the car back in, lease another new car, and never get tired of the car you are driving. Leasing may also be advantageous in some instances due to the fact that the IRS allows for more generous write-offs for lease payments than for loan payments on more expensive cars. Also, you may be able to find a great deal on the interest rate for your lease if a dealer is trying to move certain vehicles. Maybe the money you save in that case each month could be used to pay off debt with a higher interest rate. However, the disadvantage of a lease is that at the end of your lease you have no ownership in the car you have been driving for several years. You can purchase the car at the end of your lease if you have the chunk of money needed to do so (not likely if you chose to lease in the first place). My husband and I leased a vehicle a few years back. When the lease was up we were struck with the fact that we had payed all that money for all those months and were just going to hand the vehicle back to the dealer. Instead, we took out a loan to purchase the vehicle, sold the vehicle for more than the amount of the loan, paid off the loan, and had some money “left over”. A lot of work. Another thing to be aware of is that there are penalties you will pay if you fail to meet the conditions of your lease. For example, many leases have mileage limitations on them and if you exceed those miles (usually somewhere around 15,000 miles/year), you will pay for the extra miles you drove. That could add up if you spend a lot of time on the road. Excessive wear and tear on your leased car can also end up costing you extra money.