Buy or Lease Your Next Car?

First, take a good look at your finances. Ask yourself, "How stable is my job? How healthy is my general financial situation?" Affordability should be your number one consideration and this is the absolute starting point for your decision. The short-term monthly-cost of leasing is significantly lower than the monthly payments when buying: you only pay for "the portion" of the vehicle's cost that you use up during the time you drive it. If you have a lot of cash upfront, then you can opt to pay the down payment, sales taxes - in cash or rolled into a loan - and the interest rate determined by your loan company. Buying effectively gives you ownership of the car and that feeling of "free driving" that goes on providing transportation. If, say, you want to get into luxury models but can't afford the upfront cash of purchasing the vehicle than you're a good candidate for leasing. Unlike buying, it gives you the option of not having to fork out the down payment upfront, leaving you to pay a lower money factor that is generally similar to the interest rate on a financing loan. However, these benefits have a price: terminating a lease early or defaulting on your monthly lease payments will result in stiff financial penalties and can ruin your credit. You need to make sure you carve out the monthly lease payment in your budget for the foreseeable future, at least for the duration of the lease.

Making a buying or lease decision also revolves around your personality and lifestyle choices. Think about what a car means to you. Do you bond with your car or would you rather have the excitement of driving something brand new? If you would prefer to drive a car for more than five years, negotiate carefully and buy the car you like and then drive it into the ground once it's paid off. If, you don't like the idea of ownership and would prefer to drive a new car every two to three years then you should choose to lease.

Next, factor in your transportation demands: How many miles do you drive a year? Do you properly maintain your vehicles? If your answer is: "I drive 40,000 miles a year and I don't really care much about my cars because I don't mind dealing with repair bills", then you're probably better off buying. Leasing is based on the assumption of limited-mileage, usually no more than 12,000 to 15,000 miles a year, and wear-and-tear considerations. If you do not stay within the prescribed mileage limits and keep in the car in good condition then you may incur hefty charges at the end of your lease.