Should I Lease or Buy?

Thinking about that new car?
Besides determining what make, model and color you want, you also need to decide how you'll finance the acquisition. Leasing has become an increasingly popular option, but is it right for you?

There is one line of thinking that says leasing is a sensible option, because the value of a car depreciates the minute you drive off the lot. Therefore, it is less valuable to own. Others say that today's cars can last longer than they used to, and buying makes more sense.

The choice isn't easy to make and can come down to personal preferences. Here are some factors to consider:

What can you afford?
If you find the car you like but can't afford much of a down payment, leasing can mean lower monthly payments to drive away with the vehicle. A reasonable monthly payment is one of the real attractions of leasing, especially if you are considering a luxury car.

What are the finance rates?
If dealers are offering 0% (or something close to 0%) financing terms on car loans, a purchase can make a lot more sense.

What are depreciation assumptions?
Car leasing payments are based in large part on the value of the car when your lease ends. The higher the value at that time, the less you'll pay now. Recently, due to a glut of used cars, values at the end of leases have been declining, which made leasing terms less attractive.

Do you want payments to end?
If you lease today, you can count on payments not just through the life of the lease, but when you make your next purchase or lease selection. If you want a break from payments, owning is a better option.

Do you regularly want a new car?
If so, leasing may be the right choice. Trying to pay off a new car in time to trade it in (free and clear) in two or three years can be hard to do, and may not be worthwhile. A new car every few years can also mean lower maintenance costs than owning a vehicle for 8-10 years.

Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.