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Notes From The Road

Buying vs. Leasing a Car
By John LaBrie/

In contrast to buying, leasing is roughly the equivalent of renting a car for a specified period of time. It belongs to someone else, but you pay for it while you're driving it. This, too, has advantages:
  • Lower monthly payments. Since you only drive the vehicle for a portion of its life, you don't have to pay for its full value. This means that the monthly payment can be less than when buying.

  • Low or no down payment. Often, this is part of the leasing deal.

  • You can drive a more upscale car. Leasing enables you to get a more expensive, better-equipped vehicle for the same monthly payment you'd be making to buy a less expensive model.

  • Possible tax deductions. If the lease is a legitimate business expense, you may be able to deduct it from your taxes.

  • No resale worries. At the end of the lease, you simply turn in the leased car and get a new one without the hassle of having to sell or trade it in.

  • You're tied into a cycle of ongoing monthly payments.

  • Possible extra charges. You may need to pay additional money for excessive wear and tear if you drive more miles than for which you originally agreed, or if you need to turn in the vehicle before the end of the lease.

  • The vehicle must be kept in good condition. This means having maintenance performed on time (a good idea anyway), having any dents or damage repaired promptly, and keeping the vehicle looking good.

  • Specified insurance. The leasing company may require you to maintain a certain amount of insurance coverage.

Leasing usually is better for certain types of drivers. These include those who:
  • Plan on getting a new vehicle every few years.

  • Are sure that they won't need to get a new vehicle before the end of the lease.

  • Don't have a cash down-payment or trade-in.

  • Want to drive a more expensive vehicle than they can afford to buy.

  • Tend to keep their vehicle in good shape, both in appearance and mechanically.

  • Don't accumulate high mileage (12,000 or less per year).

  • Aren't interested in customizing their vehicle.

  • Can claim their vehicle as a business expense for tax purposes.

If you don't fit into this profile, you may be better off buying a car. With a low down payment and lower monthly payments, leasing may seem like a better deal in the short term. But at the end of the leasing period, you have nothing of value and are forced to immediately get a new car. Even with higher monthly payments, the equity you gain by buying can often make it the better financial option over the long term, especially if you continue to drive the car after the loan is paid off. In addition, if leasing limitations rub you the wrong way, buying allows you to enjoy the freedom of owning your own vehicle.

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