Should I Lease Or Buy A Car?

by Guest on July 16, 2010

It is the age old question, do you lease or buy?  It is a thought that comes across most of our minds when we are looking for homes or cars. Big questions emerge such as; will I pay more to lease it? Wouldn’t I want to own it outright if I am making a monthly payment on the car? What exactly are the perks when leasing a car? Those and many more questions should be addressed before you sign your name on the dotted line.

Alright, let’s be honest.  Who really enjoys stepping onto a car lot and getting bombarded by pushy, aggressive sales people? Even if you mentally prepare yourself for the challenge ahead, you can never fully understand all the curve balls that come your way.  Sure, you start with the fun part – the test drive!  You feel the leather under your hands, enjoy the new car smell, and play with all the gadgets on the dash board, but you know what is to come.  The minute you step out of the car here it comes.  PAPERWORK!  Be prepared because they are going to want to know just about everything.  You’ll also have to contend with those three little numbers that mean so much to our society… the credit score.

SHOULD I LEASE?

Now you are sitting there wondering what exactly do I do?  Lease or buy?  For those of you who have not leased a car before it can seem like an overwhelming and daunting task. In the past, leasing was thought to be beneficial for only business owners who need to have the deductions.  Today, more and more people are leasing for several reasons.  One is the low or no down payment.  You also do not need to break your budget on monthly payments since they are typically lower.  When you sign on to a lease you are essentially renting a car for a fixed number of months.  You basically are covering the depreciation of the vehicle, not so much its full purchase cost. It’s important to understand that as long as you lease the car you will always have a car payment and you will never actually own the car. Think of it this way. When the lease is up you hand over the keys or try to finance the remaining balance of the car.  Leasing also comes with mileage restrictions.  It is not uncommon for many leased cars to restrict your mileage to 15,000 miles or lower per year.  You will of course pay a fee if you go over that.  Finally, you might want to check with your current car insurance company.  A great number of insurance companies will charge more for a leased car versus a purchased car.

SHOULD I BUY?

Now onto buying!  One of the most important facts of buying is that the monthly payments are usually higher than leasing.  This also often goes hand in hand with a larger down payment.  Then the one nasty word has to come into mind, depreciation.  When you purchase a car your payments are based on the full cost of the car.  Depreciation can hit you the minute you drive your new purchase off the lot. In a few short years, many buyers will find themselves making payments on a car that is nowhere near the purchase price they agreed to.  On the flip side, at some point you will own the car and be free of car payments.  As mentioned above, you might actually notice that your car insurance may provide you with a lower rate than if you were leasing. You should also not forget that the car is yours to drive how much you want. There are no mileage restrictions that you have to adhere to.

STILL NOT SURE?

You have to look closely at your personal circumstances.  It is in your best interest to determine what you can afford every month, what down payment you have, and what perks are most important to you in the leasing versus buying challenge.  Check the different leasing options and review what the dealer can offer you as far as interest rates.  Regardless of your choice, be prepared before you walk into any dealership!

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