Leasing vs. Buying: Which Is Better?

Leasing vs. Buying: Which Is Better?

If you are in the market for a new car, there are probably a few things that have been running through your head: How will I look in the driver's seat? What kind of gas mileage will I get? Should I buy or lease? The first two questions can be answered quickly and without much assistance. The buy/lease dilemma, however, warrants some looking into.

Despite what many people think, there is not one right answer when it comes to financing a car or truck. There are benefits to both buying and leasing, and each person's situation will be different, so your final decision should be based on your own needs.

Benefits of Buying

If you plan to keep your car for four years or more, most experts would tell you to buy. You will be faced with higher monthly payments, but you can end up saving thousands of dollars in the long run. If you enter a lease-to-buy situation in order to lower monthly rates, most would say you are throwing money away, because you will eventually pay far more for the car than it is worth.

Unlike with most leases, you can maintain a high trade-in value on a car you own, so you can put its worth towards your next purchase. Buying can also help you develop a relationship with a specific car dealership. While this does not always pay off, it can result in financing deals, perks and upgrades in the future.

When Should You Lease?

Leasing is your best bet if you plan to get rid of your car in a couple of years. You will enjoy lower monthly payments, and you will not be responsible for the full cost of the vehicle. This aspect of leasing has allowed countless people to spend time driving an automobile they simply cannot afford to buy, making leasing the preferred practice of real estate agents and sales people the world over.

There are tax breaks to be found in leasing. If you are self-employed, a lease on a car can go a long way in helping you save money in April. However, there are financing offers that can benefit the self-employed on car purchases as well, so it is important to discuss your options with an accountant before you make a decision solely for tax purposes.

What Happens When Your Lease Is Up?

If you do lease a car, you should be aware of the choices you'll have when your lease is up.

• Turn your car in. You might have to pay for excess wear and tear or mileage.
• Buy your car. You will have to pay residual value of the car.
• Trade your car in for a new lease. Surpluses or deficits will be applied to balance owed.
• Sell your car privately. You will have to pay the leasing company the balance you still owe on the car, but you are entitled to any surplus from the sale.

Online services such as Autobytel can help you view all your options before you even get to the car lot. With easy-to-understand leasing and buying guides, you can compare long-term pricing schedules, view available rebates and price out your ideal vehicle on their site. Besides helping you solve the "lease or buy" question, sites like Autobytel provide vehicle comparison charts, financing information and allow you to search through thousands of new and used cars. Whether you're leaning toward leasing or buying, or just want to gain all the information you can, these sites are great places to start.

Keep in mind that if you are looking for stability and a long-term vehicle, buying is most likely the way to go. If you would rather drive a new car every three years than be saddled with a used car, you should look into leasing. Regardless of your situation, before you drive off the lot, make sure you have weighed all your options.