Vehicle Leasing Versus Buying Recommendations

The decision to lease or buy a vehicle can be difficult as each offers some advantages and disadvantages. For example, lease terms are easier on a consumer's monthly budget, but buying makes more financial sense over the long term. In order to make the best decision for their financial situation, consumers should understand the differences between buying and leasing.

Lease Advantages

The initial cost to lease a vehicle is very low. The down payment and monthly payment required for a lease is often significantly lower than the down payment and monthly payment when buying a comparable vehicle. In fact, many times there is no down payment at all on a leased vehicle depending on dealer promotions. Drivers also do not pay taxes at the beginning of a lease, further reducing the out of pocket expenses. Lease drivers also avoid the hassle of selling their car when it is time for a new one.

Buying Advantages

The primary advantage to buying a car is the financial cost over a period of time. While a lease owner is making payments for the use of a car, a buyer is building up equity. Though cars decline in value over time, the driver that buys a vehicle does end up with some value when the vehicle is paid off. Drivers that buy a vehicle are free to sell or trade the vehicle whenever they choose. A driver that leases a vehicle is stuck with it until the lease term expires or she must face additional expenses for early termination.

Driving Considerations

Most lease agreements allow about 15,000 miles per year. Those that drive substantially more or substantially less may benefit from buying instead of leasing. Those that drive more than 15,000 miles per year will generate a large fee at the end of the lease for overage miles. As mileage is a large factor in determining value, those that drive less than 15,000 miles per year will get more value from buying a new car that will not quickly depreciate in value due to mileage. For the same reasons, those that are very rough on their vehicles or keep them in perfect condition should consider buying instead of leasing.

Lifestyle Considerations

Drivers who want a new car every two or three years will benefit from leasing. Leasing allows a driver to drive a new car every few years with a minimal down payment and reasonable monthly payments.

Those who may have dramatic changes in the near future should consider buying instead of leasing. For example, drivers that lose their job, get divorced or have other changes that impact their finances may find they are unable to pay the lease, which will cause numerous fees and other expenses. While the driver would also be unable to make the payment on a vehicle purchase, the driver could sell the vehicle with no additional penalties.