The Pros and Cons of Auto Leasing

Many consumers become confused when it comes to choice between buying and leasing a car. And it's no wonder- both have many variables to consider, and either choice will have far-reaching consequences for the buyer or leaser.

If the main consideration is your monthly payment, and you do not have a large down payment to put down on a car, leasing may be the right decision for you. Lease monthly payments are generally lower than a loan payment. And since most leases don't require large down payments, this also means that people can often afford to lease a much nicer car than they could buy.

If having a car to sell or trade in at the end of its use is a consideration, then purchasing a car might be the right decision for you. Leased cars can be bought at the end of the lease term, but usually for large payouts, and often for more than the car is actually worth. When you purchase a car, at the end of the financing term it is yours, no strings attached. You can sell it for the blue book value or for less if you wish, or you can trade it in to lower the price of your next car.

If convenience is your goal, either one might be right for you. The convenience of a leased car is that at the end of the lease, you don't have to worry about selling it or maintaining it- you give it back to the dealer and the deal is finished. You can simply lease another new car with little hassle. The convenience of purchasing a car is that you never have to worry about mileage overages. Leased cars usually have a specific miles-per-month amount, with fees for miles that are driven over and above that amount. When you own the car, you may drive it as far and as often as you wish with no penalty other than purchasing the extra gas. Another convenience associated with purchasing a car is that you can keep the car after the loan is finished- you do not have to worry about taking it back and finding another car.

When you purchase a car, the sales tax on the entire car is paid up front at purchasing time. However, with a leased car, you do not have to pay the full sales tax on the car- you only pay the sales tax on the part of the car value that you use, and it is spread out monthly over the life of the lease. If you do not purchase the car at the end of the lease, then you have not paid the full sales tax on the car.

One consideration for a lot of decision makers is the length of car payments- with a car purchase, you make car payments only during the life of the car loan. If you choose to lease the car, you will always have a car payment. When the lease runs out, you have to start again with a new car lease, and there is no end to them. The reliability of the car in question is a big consideration as well. Many car leases are in effect during the time that the car is under warranty. When the lease runs out, you can lease another car. With a purchase, once the warranty runs out- you're on your own. To get a more reliable car you will have to sell or trade in your other car, and then come up with another down payment for the next car.

Both leasing and purchasing cars have advantages and disadvantages, but it will be up to you to decide which factors will be the most important to you. Let the most important factors to you drive your decision and you will end up with a plan that you can live with.