Is it Better to Lease or Buy a New Car?

The perennial question among those looking for a new car is whether it makes more sense to lease or buy. Personal preferences and individual circumstances will be the guiding factors, rather than a general rule that one method of getting into a new vehicle is better than the other. Also, occasional deals and low-financing options on that dream car may sway the decision in either direction.

Payment Amounts

Consumers looking for both low monthly and down payments may choose to opt for leasing. Many lease terms will allow those with good credit to turn the ignition key on a new car with no money down. The consideration then becomes about the importance of the monthly payment amount -- for the higher the initial payment, the lower the monthly cost. Lessees generally pay the car's depreciation rather than its total value, so the payments come in measurably lower when choosing that option.

Trade-Ins

Selling a car can be fraught with time-consuming headaches and uncertainties, as can trading it in when purchasing a new one. For those seeking a quick, hassle-free exchange when desiring a new car every few years, the lease option provides the direct benefit of walking into the dealership, giving back the keys, choosing the latest model and driving out within the hour. As the previous car's value was already decided at the time of the initial lease, the financial predictability is also a plus when leasing.

Equity

Those who choose to buy rather than lease can look forward to the time when the loan is paid, the garage's tenant is free and clear, and no further payments are necessary. Lessees pay each month without the promise of ownership, although they do have the choice of whether to purchase the car at the lease's expiration. This option, however, is generally more expensive, making the decision whether to purchase or lease critical from the beginning.

Options

Consumers who choose to lease have very little flexibility if they want or need to get out of the lease prior to its expiration. They may be responsible for as many as six extra payments for the privilege of dropping the lease early. Mileage charges can be another problem. Depending on the lease terms, any miles driven over the standard 10,000 to 15,000 annual allowance can lead to an expensive consequence.