Should You Lease or Buy an Automobile?

The price of a new automobile today can be a bit intimidating. However, with the right payment schedule and low interest rates, it is easier than many people think to buy a new car. Nonetheless, many

drivers will make a strong case for leasing instead of purchasing a car. Leasing has become increasingly popular over the past decade. Of course, your personal use for the car, your financial situation and your ego will be significant factors in your decision as to which is best for you.

While leasing for business purposes can be beneficial from a tax deduction standpoint, there are various pros and cons you need to take into consideration when leasing a car for personal use:

The upside of buying a car:

It’s all yours, meaning you own the car and can customize or accessorize as you choose.

No mileage limits or other restrictions.

Manufacturer incentives can make purchasing more affordable.

You can sell when you choose to or use the car as a trade in when you purchase a new car. Although the car will depreciate in value, you still have a salable asset.

The downside of buying a car:

Repairs are your responsibility, which means on your bill once the warranty runs out.

Sales tax is due immediately upon purchase.

Cars get old, lose their "looks" and depreciate in value

Monthly loan payments can be higher than leasing payments.

The upside of leasing a car:

Typically lower monthly payments, allowing you to invest your money elsewhere.

You can always be seen driving a new car if that matters to you.

With an open-end lease, you can purchase the car at a lower cost when the lease is up

You can pay the sales tax over time and claim a tax deduction if you use the car for business.

The downside of leasing a car:

You do not have ownership

You must return the car in the same condition (normal wear and tear excepted) as when you first leased it

Mileage and other restrictions.

It can be very hard and/or costly to terminate the lease early.

When you lease a car, you are essentially renting a car for a longer period of time than you would on a typical vacation. For the short-term, such as a year or even two, leasing can be advantageous from a cost perspective. After that, unless you are leasing for a business, the longer you lease, the more you will lose the financial advantage.

Over the long-term, buying will pay off. There are also too many restrictions that can make it very hard not to owe additional money when you return a leased vehicle that you have had for three or four years.

If you do opt for leasing, make sure you read the leasing agreement carefully and look for additional costs. If you are buying, do your homework and make sure you know what to expect in terms of price and standard features. Don’t get talked into paying for numerous extras that you do not need.