• Should You Buy or Lease Your Next Car?

    If you have children, take part in chauffeuring their soccer team, and are known to feed them snacks and drinks while running errands, you're probably not a good candidate for leasing a car. Between the food stains and the marks from muddy cleats, the lease-end wear-and-tear charges would put you in the poorhouse.

    The condition you keep your car in is just one of the many things to consider when contemplating an auto lease. Another is how many miles you typically drive in a year. Still another is how much you look forward to the day your monthly car payments end and you can use those dollars for something else (like saving for retirement or college).

    While these issues keep many drivers from leasing, others enjoy the benefits that leasing provides. Dave Edwards of Hampton Roads, Virginia, leases for two reasons: Economy and lifestyle.

    "We started leasing because we wanted to get a luxury SUV without having to make a big cash down payment, and we wanted to keep our monthly payments on the lower side," says Edwards. "My wife and I like being able to afford the latest models, even though we recognize that our car payment is an expense that will never go away."

    A side-by-side comparison might offer a clearer picture of the advantages and disadvantages of leasing.

    Advantages

    Lease

    • No or low down payment
    • Lower monthly payments
    • Lower sales tax (paid only on amount of car value used)
    • Lower repair costs (mainly maintenance)
    • Manufacturer's warranty usually covers lease term
    • Drive a better car for less money
    • Get a new car every few years

    Buy

    • Pride of ownership
    • Monthly payments end
    • Resale value
    • Lower overall cost of ownership
    • No mileage limitations
    • Flexibility to change cars when you want
    • Lower insurance costs
    • No wear-and-tear charges

    Disadvantages

    Lease

    • Insurance could be higher
    • No equity built up in car
    • Lifelong car payments
    • Wear-and-tear charges
    • Typically only allowed up to 15,000 miles/year
    • Additional mileage 10 to 25 cents per mile

    Buy

    • Higher down payment
    • Higher monthly payments
    • Repair costs after warranty expires
    • Higher sales tax paid

    The Bottom Line Cost of Leasing vs. Buying

    While most experts agree that buying is more economical than leasing in the long run, some drivers point out that the pleasure of driving an older car is lower. As if that weren't enough to ponder, there may be tax issues to consider as well if you drive for business and can deduct mileage or the vehicle's depreciation. Speak to your tax advisor to see if you can take advantage of this tax benefit.

    Obviously there's a lot to consider when deciding whether to lease or buy your next car. Maybe it all comes down to whether you prefer that new car smell every few years or more money in your pocket over the long term.

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