The Wheel Deal: To Buy or Lease Your Next Automobile

It’s one of the most common — and beguiling — questions that consumers face: to buy or lease a new car?


Investing your hard-earned money in a new set of wheels is a major financial commitment, whether you ultimately choose to buy the vehicle or lease it, according to personal finance experts. “It’s a balancing act that comes down to expectations and priorities,” explains Rick Kagawa, CFP®, of Capital Resources & Insurance in Huntington Beach, Calif. “If you feel strongly about driving a nice new car but can’t afford the down-payment that goes with buying one, you might lean toward leasing. But if you’re looking for value and cost-efficiency, and you have the cash for a down-payment, buying might make the most sense.”

It’s good to get the facts before you decide whether to take the buying or leasing route. Here are some factors to weigh as you evaluate what’s best for you:

BUY Typically lower interest rates than leasing Substantial down-payment often required
 You own the vehicle once you’re done paying off the car loan (if you took out a loan to buy it) You’re responsible for repair and maintenance costs once the warranty expires
 Typically a lower overall cost than leasing, all factors considered Hassles associated with eventually selling the car or trading it in
 You can modify the vehicle as you see fit An automobile is a depreciating asset

LEASE Low/no upfront payment gives flexibility to lease a nicer/more expensive auto Potential charges for mileage overage at lease expiration
 Monthly payments may be lower than if you purchase No ownership equity in the vehicle; you’re essentially renting it
Auto may be covered by warranty for all or most of lease term Potential to be charged for excessive wear and tear at lease-end
Option to buy vehicle at expiration of lease (Research the value of the vehicle at the end of the lease prior to purchasing.) Higher overall cost than buying over the long run
You can put the money that would otherwise be used for a down-payment to constructive use Substantial penalties for early lease termination

You might be a better candidate to lease a new car if you:
• lack adequate cash on hand to make a substantial down-payment.
• prefer to get a new vehicle every few years.
• entertain business clients and prefer to drive a luxury vehicle that you may not otherwise be able to afford to purchase.
• prefer not to own the vehicle.
• want a vehicle that’s covered by warranty for all or most of the time you have it.

You might be a better candidate to buy a new car if you:
• want to keep and drive the vehicle for a longer period (beyond four or five years).
• prefer to invest your money to own a vehicle.
• have enough money to make a sizable down-payment.
• tend to put high mileage on your vehicles (lessees usually incur charges for averaging more than the typical 12,000-15,000 annual mileage limit).
• intend to modify your vehicle.
• want the lowest overall vehicle cost.
• are comfortable being financially responsible for maintenance and repairs once the vehicle warranty expires
Regardless of which profile you believe fits you best, it’s always wise to crunch the numbers before deciding whether to buy or lease your next vehicle. The automotive website offers useful calculators for auto loans and leases.










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