Car Buying: Lease versus Buy

In the process of car buying you will be presented with many options for a vehicle. On top of the different makes and models, you will also have to decide whether or you should buy or lease the car. Most car companies out there offer some type of lease program with all of their new cars. When you try to decide which option is best for you, there are several things that you will want to consider.

Initial Cost

If the initial costs of a car are the most important factor for you, you will always come out ahead with a lease. When you lease a car, you are not always required to invest a down payment. The first payment is used in lieu of a down payment amount. The more money you pay upfront, the lower your monthly payment would be. 

Even when you compare the costs with a zero percent interest APR financing offer, you will still come out ahead with a lease offer. When you make lease payments, you are only paying for the portion of the car's life that you are using. Therefore, you are paying for the depreciation over the three years that make up your lease. With a loan, you are paying for the balance of the loan and the interest on the loan. You also may have to come up with a down payment with a loan. 

Long-Term Cost

On the long-term, you will almost always be better off buying the car. For example, let's say that you bought a car and drove it for the next 10 years. Your auto loan usually lasts for only five years. Therefore, you do not have any form of car payment for the last five years. In this example, it wouldn't matter what the difference in the monthly payment was between buying and leasing. You are getting five years of no payments whatsoever. Therefore, if you take a long-term view of the process, buying will provide a better option.

Maintenance

Another thing to consider when comparing the two is the maintenance involved. With a lease, you will never have to worry about any large maintenance problems. If your car breaks down, you simply take it back to the dealership and let them take care of it. You come back and pick it up when it's done. 

When you buy a car, this burden is shifted over to you. You have to maintain the car and if something breaks down, it's up to you to fix. If the problem you have is under warranty, then you are in good shape. However, if it falls outside of the warranty, then you will have to pay for the repairs yourself. This can add up to thousands of dollars, depending on the type of repairs needed. Therefore, you have to decide whether you value the certainty that comes with a lease or not.


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