Is car leasing the best choice?

Some of us choose to buy our cars and some of us choose to lease them. The question is which is best choice to take, car leasing or car buying?

Regard a vehicle lease as a long term rental. You do not really own the vehicle and at the completion of the lease you will then return it and pay any end of lease cost that is due, to complete your contract.

In contrast when you buy a car and pay for it with a loan, the car is still your property at the finish of the loan period. If you then decide to buy a new car it's up to you to trade in or sell the old one.

Most new vehicles will lose their value just as soon as you drive it out of the sale rooms! Obviously it also depreciates with age and as the mileage increases.

Lease payments will cover just the portion of the cars value that you use during the time you drive it, the depreciation and not its complete cost. Finance charges are added on to your payment.

When you buy a vehicle with a loan you are liable to pay back its full cost, plus finance charges. Depending on your deposit or value of your trade in car, this can result in higher payments than for a lease, even if you get a long term loan.

At the end of the lease you may be liable to pay excess mileage fees. A maximum number of miles are generally stipulated that you can drive during the lease period. It is company policy that you would repay a charge per mile for every mile driven over that limit. However, you can often buy extra mileage at the beginning of the contract at a cheaper rate than you would pay for more mileage at the end!

As regards damaging the vehicle, the leasing company would naturally expect a degree of wear and tear. However the car will be checked for any damage or excessive wear and tear when it is returned at the end of the contract.
A fee would also have to be paid if you choose to end a vehicle lease early.

It is a misconception that the car lease firm takes responsibility for the maintenance of the car during the contract period. You will be responsible for the costs of looking after the car, just as if you owned it.
Warranty repairs will be honoured no matter who owns the vehicle. Usually you will find that lease terms end before a vehicle goes out of warranty.

The best way to try to get an idea as to the deal that would suit you best is to work out how much you are actually prepared to pay to buy a vehicle. Add up all the payments you would make on the car and then compare that to the value when the payments have ceased. Car ownership does not usually make money unless however you may be buying a classic car.

So, is it best to lease or buy?

Leasing:

A car lease might be best if you need a new car every two to three years.
It would be preferable to drive a new vehicle but cannot afford to buy one.
On average you drive 15,000 miles or less each year.
You would not be using the vehicle in such a way that it would cause excessive wear and tear.
You are not in a position to make a large down payment.
You use the car for business and can legitimately write off your lease expenses.

Buying:

You plan to pay off the car and keep it to avoid loan payments.
You are in a position to pay for repairs after the warranty period has passed
You put more than 15,000 miles a year on a car
You have credit issues, sometimes if this is so it will be easier to buy than to lease
You may intend to trade it in for another vehicle in less than two years