Is It Always Better to Buy than Lease a Car?
Posted by admin in Buying Stuff
I've always believed that the best you can do economically when it comes to car buying is to get a used car and drive it into the ground. I would never buy new, as cars depreciate by thousands of dollars as soon as you drive them off the lot, blah, blah, blah…
I also would never lease a car. That's what all the experts have told me, and anytime I see someone in a leased car that I know they couldn't afford to buy, I assume they've made a foolish financial decision.
Except I've talked to some people recently who told me they ran the numbers and it was cheaper for them to lease than buy. That the lease payment was about the same as a car payment, their upfront cost wasn't bad, and that with the limited life of leases, they always had a fairly new car that runs well, so they never have to deal with repair bills.
Sure, they didn't have a car they could sell at the end of their lease like they would have if they'd bought it, but by the time most cars are paid off, they're starting to have repair needs and aren't worth a whole lot if you wanted to sell them privately or trade them in. And I saw the wisdom in that logic.
When I recently reviewed the Wall Street Journal Personal Finance book, I again read the advice that you shouldn't lease, but the author seemed to dwell more on the fact that you pay more if you drive more miles than the lease agreement allows, which I know I wouldn't. The book also presented a worksheet to compare buying versus leasing, and it seemed like it could be a wash, especially if your upfront lease payment was reasonable.
I'm going to be in the market for a car soon, and now it seems like a tougher decision on what to do. Can I really be zooming around in a cooler ride for the same money, or am I fooling myself? Is there fine print in the lease agreement that I just don't understand?
If you've ever done both, buying and leasing, I'd be very interested to hear your thoughts on the topic. Which was better and why? Are there money traps I can't see? Are personal finance experts just uptight, or are they talking truth?
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I have purchased and leased a car and have to tell you, it seems cheaper to lease than to buy outright. I don’t think I will ever go back to a purchase. As long as you lock in your lease with a dealer or factory special your payments will be much lower than a purchase. Since you don’t pay interest (which you can’t write off anyway) I think it is a done deal for me. The clencher for my lease deal was that if you added up all the payemtns, downpayment, and buyoff (which is negotiable at the end) I would have ended up paying the same as the sticker price for the car new. Yes, you need to finance the remainder if you buy the car at the end but; a) who does that (I always trade in) and b) you only end up paying finance charges and interest on less than half of the price of the car.
You have to factor in two things nowadays when deciding on a lease.
1) Lease terms can be negotiated, just like a purchase.
2) Today’s cars run for a lot of miles. If you buy a car and take care of it, it will run long after you’ve stopped making payments. And the repair costs will be much less than constantly paying a lease.