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the great debate: cars… lease or buy

Posted on 27. Mar, 2009 by janelle in penny pinchin'

A few folks in my circle of friends have recently mentioned wanting/needing new cars.  And, undoubtedly, the conversation turns to whether or not it’s best to buy a car or lease a car.  Now, some folks feel very strongly one way or the other.  I personally tend to think that it really depends on the individual situation - how long you want to have the car, how will it be used, budget, etc.  But what do I know…  So I headed out to the world wide web to see what others were saying.   I came across an article on YAHOO! Finance that talks about leasing, how it works and how to determine whether or not it’s right for you.  Below is a recap of the article.  For more details, please visit the site here.

1. Buying vs. leasing a car - In general, leasing a new car ends up costing you more over time than buying one. The option to lease typically means a lower initial cash outlay and lower monthly payments than a typical new car purchase.
2. How a lease works - The cost of the lease will depend on the price of the car, the interest rate, the lease period, and whether the lease is closed- or open-ended. With an open-end lease, you get unlimited miles, but if the resale value of the car at the end of the lease is less than the agreed-to amount, you must make up the difference. A closed-end lease imposes a mileage limit.  If you average more than this, you’ll have to pay a per-mile surcharge at the end of the lease.  Most leases require some down payment, but the actual amount will vary from dealer to dealer and car to car. TIP: Try to negotiate the actual car price before asking for a lease. The higher the price, the higher the lease cost.
3. Is a lease right for you? - If short-term use is your goal, a lease may make the most sense. If you will always need a car, but it doesn’t have to be a new car, leasing is an expensive option.  If savings is a priority over convenience, and you absolutely must have a car but can’t afford a new one, consider purchasing a used car rather than leasing a new one.  If you must have a new car, and leasing is the only way you can afford it, don’t lease as much car as you possibly can - shop around for the best interest rate. 

Do you have a car?  Did you buy or lease?  We want your two cents!

Tags: budget, car payment, cars, finance, lease vs. buy