Lease or buy car?

Question

what are the ideal situations for a person to consider leasing a car instead of buying this year?

Answer 1

Unless you are rich and can afford throwing money down a drain via a lease(i.e. renting a car)  then buy. If push comes to shove ti would be better for you to have a car, but have no car payment.

Answer 2

Leasing only works when you can write off the entire lease as a business expense

Otherwise leasing is a dumb idea - it is like paying rent and not building any equity in what you have been paying for

Buy a car even if you can only afford so much ~ you will actually own somthing once it is paid off

Answer 3

Leasing is good for people who don't drive a lot and want a new car every few years. If you want to keep a car for many years and enjoy it with no payments, buy. Leasing allows you to enjoy lower car payments and have a new car every few years.

To be specific to "this year" you won't be stuck trying to get rid of a gas powered vehicle in 3 years when we are switching to hydrogen, electric, and natural gas. With a lease, you return it and walk away.

Answer 4

Leasing is a good idea if:

You don't want anyone to get your car in a settlement (IRS, ex spouse, etc)

You need to have expenses to write off

You feel the need to change vehicles every 1-2 years and can affort to pay a car note forever

It's ultimately better to buy the car (provided it's a good one). You can find yourself without a car note eventually, or benefit from the trade-in value on your next car purchase.

You won't have a balloon payment in order to stay in that car - and the purchase price at the ends of leases are not really good deals.

Answer 5

Leasing can be good for the right people.

Essentially, in a lease, you never "own" the car. You make payments for 2-3 years, then hand the car back. Think about it almost like a long-term rental.

There are some advantages to leasing under the right circumstances.

First, if you trade out of cars every 2-3 years, it might be right for you. In a lease, you have a contract for a fixed amount of time. I discourage leasing past 3yrs - 2 is better. In a 'loan', after 2 yrs, if you try to trade you will probably be upside down, and owe more than the car is worth. So, in order to get out of it, you have to have a lot of cash, or finance that negative on the next car.

The contract will tell you that your payments are $x per month plus tax. At the end of the term, you will have a residual value for the car. The lease company basically says "In three years, we feel this car will be worth $Y" You have the option to buy the car at the end of the lease for that amount. If you are in love with the car, or it is worth well above the residual, you may want to consider that. However, in most cases, you simply hand over the keys and walk away.

In a lease, there is a specified amount of mileage. Most leases are constructed around 12K or 15K miles per year. If you go over the mileage, there will be a per-mile penalty at the end of the lease. So, if you drive a lot, it may not be for you.

Leasing typically allows a person to get a nicer car for the same payment as a lower-end car on a loan. that is because of that residual. You are only "financing" the difference between sales price and residual. In a loan, you are financing the entire purchase price.

In other words, if a car has a sale price of $25,000. on a three year lease, lets say the residual is $12,500. You are only "financing" $12,500 for 3 yrs. If you were to buy that same car, you would finance $25,000 either for a longer term, or a much higher 36 month payment.

Lastly, in a lease you pay less sales tax. In a conventional purchase on that $25k car, you pay tax on the whole 25,000. In a lease, you pay sales tax on the monthly payment. In other words, your payment of $300/month is actually $300+sales tax. BUT you are only paying tax on the leased amount - in the earlier example you are only paying sales tax on $12,500.

Times leasing is good: You trade cars ever few years, you dont drive more than 12-15k per year, you want to put less down

Times it is bad: You like to keep cars a long time, you drive a lot, you want to put a lot of cash down.

If you go into it 'eyes wide open' - aware of all the pros and cons, then you will be OK.  To everyone who says "never lease" read this forum.  Look at how many people want to trade out of their purchase after 2-3 yrs, and are completely upside down.  They will end up making payments on a car for 6-7 yrs, when they don't want it past 2.  Tell me the advantage in that?

Hope that helped some

Answer 6

Buy a car, leasing is throwing away money and you don't even own the car. And when you choose to buy that car, thats wasting even more money if you like the car that much after the lease is over. Buying you can do more to the car.