Should I Buy or Lease This Car?

Buying or leasing vehicles is a decision we face every time we fall in love with our next one. Aided by muddy marketing and sales tactics by dealerships, salespeople, and car finance companies, buyers wrestle with trying to find the right answer. No wonder—we face a massive enemy! Let me help you along the road before those who put your money into their pockets can speak.

Buying is still generally, the best choice. Leases have built in interest costs that are sky high. Remember, they figure that if you're leasing instead of buying, it's because you can't buy…so they get you. And leases are more complicated, especially at the end of the lease term. But buying really works best for those who keep their cars beyond 4-5 years, can pay cash or get cheap financing which is often available, and are NOT trying to write it off as an employee of someone else. And who drive a lot of miles.

Leasing can be the only way to acquire a vehicle, especially if you're in outside sales or construction as an employee, and want to write off the vehicle. Employees may not use depreciation, and so are stuck with either mileage or only the out of pocket costs. Naturally, the win win is to have the employer reimburse for all expenses, and take less salary to make up. Less income for you to pay tax on, no limit on deductions, same money to your employer. But if that can't happen, then leasing gets you the deduction. Another interesting and not-mentioned part: leased vehicles don't get the restrictions for luxury autos that bought vehicles do. They're supposed to, but it doesn't work out that way. So if your eye is on an expensive vehicle to be used for business, then by all means, lease if you can negotiate a good deal. And, if you're one who trades vehicles regularly enough that you always have a car payment, leasing shifts most of the burdens away from you and keeps you in nice, clean cars.

The end will come, though, so be careful. When you buy a vehicle and want to cut it loose, you trade it or sell it. Or give it to your kids. With a lease, it's not that simple. You have an agreement to cover a residual value that is pre-determined in the lease. If you've beat it up and it's not worth that, you have to cover. If it's worth more, they're not likely to tell you! And there are charges for excess mileage that are astronomical, so if you drive a lot of miles, DO NOT lease.