Although the monthly cost to finance a car is typically higher than the monthly cost to lease the same car, you will end up with many benefits by choosing to finance the car. According to cars.com, the fact that only 16 percent of retail car sales were leases in 2009 should tip you off to the fact that financing is usually the better choice.
End to Monthly Payments
After you pay off a car loan, you get to drive the car for as long as you like with no monthly payments. For example, if you buy a car with a 48-month loan, you will own the car after four years and can realistically expect to drive it for another four to six years before it starts to develop major mechanical problems. In contrast, after your lease is over, you have to either sign a new lease or purchase a vehicle, both of which will lock you into making monthly payments again.
No Mileage Worries
Leases include an annual mileage cap, and if the car has more miles than this when the lease ends, you will pay for it. The cost is anywhere between 10 and 25 cents per mile, according to the Federal Trade Commission. If you signed a lease for 10,000 miles per year and drove 15,000 miles per year for each of the three years, you will be hit with a charge of $1,500 to $3,750 at the end of the lease, depending on the per-mile cost stipulated in the lease.
Cost of Damage
When you return a leased car, you will have to pay for any damage the car has beyond normal wear and tear. The leasing company determines what is considered normal wear. Often the stain on the upholstery from when someone spilled a drink in the car or the ding that appeared on the door while you were in a parking lot do not count as normal wear. Financing a car frees you to not worry about damages because the car belongs to you, not the leasing company.
When to Lease
There are a few circumstances in which leasing a car will be more advantageous than financing a car. If you have money to spare, a lease is more convenient than owning a car because the leasing company typically takes care of all the maintenance, and you do not need to worry about selling the car when you are done with it. In addition, if your job requires that you drive a new luxury car, leasing can be a wise choice because it is easy to trade for a new car every few years, and lease payments are smaller than loan payments for the equivalent car.
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