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Buy vs Lease

The average American trades cars every three to four years. It's a common dilemma: to lease a car or buy a car - which is better? Everyone who has ever considered leasing has had this question cross their mind. After all, our parents always purchased a car; isn't that what we are supposed to do as well? The answer is - it depends. It's not possible to simply say that one is always better than the other because the answer depends on the specifics of each individual situation.

Simply put, leases and purchase loans are two different methods of automobile financing. A lease finances the use of a vehicle; the other finances the purchase of a vehicle.


Buy

If you typically keep your vehicle for five to 10 years, then financing may be your best option. The following are some additional benefits to financing:

Pride of Ownership
Ownership can instill a sense of pride and long-term value.

No Restrictions on Mileage
This is important to consider if you drive more than 12,000 to 15,000 miles per year.

Make Changes to Car’s Appearance
You can alter the interior or exterior to compliment your taste, though your choices may affect the resale value.

Lease

In a lease, you do not purchase an automobile. You contract to use it for the first, and best, period of its life. Following are some additional benefits to leasing.

Lower Monthly Payments
If the finance period is the same, your monthly payments will be lower when leasing than financing because your payments will be based on the vehicle's estimated depreciation.

A New Car More Often
Your taste and preference may change, and a short-term lease makes it easy to drive a new car more frequently.

Guaranteed Future Value
You don’t have to worry about resale value. At the end of your lease term you can turn it in or buy it to keep or resell.


Finance or Lease Quiz

You're more likely to buy

  • When you lease a car, you are typically capped at 15,000 miles a year. Additional mileage can cost you up to 35 cents per mile. And that can really add up.
  • If you like to personalize a car, this investment can be lost on a leased car.
  • If you like the idea of ownership, you are less likely to be happy with the lease option.
  • If you like the feeling of accomplishment that paying off a large purchase brings and should consider that when you lease a car, the payment ends only when you return the car.
  • If the car you presently own is over 3 years old you are more likely a buyer. While not always true, you can usually drive for less if you're willing to buy and drive for at least 3 years.
  • If you don't mind doing your own car repairs, you probably don't mind driving a car after the warranty expires.

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You're more likely to lease

  • Lease arrangements usually involve a 15,000 miles-per-year cap and charge for extra miles. If you drive very little, you may be a candidate for a luxury lease.
  • When you negotiate a 24 or 36-month lease, you can be sure you'll always be driving a new vehicle.
  • Although you need to maintain and repair your leased vehicle just as you would an owned vehicle, because you typically lease for 2 to 3 years, the car is normally under warranty.
  • Many people prefer to drive a vehicle that is priced above their means and leasing provides the solution.
  • If you don't mind not owning the car, you are free to enjoy the benefits of leasing like low monthly payments and a low down payment.
  • If you own the company, and you use your car for business, check with your tax advisor. You may be able to deduct your auto expenses, including your monthly lease payment. And if the company you work for gives you a monthly car allowance, you may want to lease since you'll be able to drive a nicer car for a lower monthly payment.

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