Leasing vs. Buying

There is no universal right or wrong answer in determining whether to lease or buy a vehicle. The decision whittles down to your own situation based on a variety of variables. To help with your understanding, consider the following pros and cons for each option:

Pros of Buying a New or Used Car

• Eventual ownership, freeing you from the pain of payments.

• After the vehicle is paid off, you're free to sell it at any time.

• You can drive at will, never having to worry about mileage limits.

• No worries over minor mishaps like spilled coffee stains on carpeting or a dog-chewed seat belt.

• You're free to modify and/or accessorize.

• Insurance costs are generally lower than leased vehicles.

Cons of Buying New or Used Car

• Monthly payments are higher than those of a leased vehicle.

• Dealers require a hefty down payment.

• Rapid depreciation, diminishing the vehicle's resale value.

• With extended use you can expect to incur repair bills.

Pros of Car Leasing

• Substantially lower monthly payments.

• Down payments, if at all, are small.

• No up front sales tax fees.

• No depreciation concerns.

• Even with a low credit rating some leasing companies will still be willing to work with you.

• If you own a business and use the vehicle only for business purposes, you can claim it as a tax deduction.

Cons of Car Leasing

• Higher insurance premiums.

• You'll always have car payments.

• Penalties for exceeding allotted miles. This generally ranges between 15 to 25 cents per extra mile.

• Wear and tear fees, creating heightened concern when traveling with pets or small children.

If You Decide to Lease

Understand that rates are determined by the difference between the vehicle's purchase price and salvage value (indirect term for the vehicle's predetermined worth at the end of the lease agreement). So to keep your payments in check, look to lease a vehicle that holds its value. Otherwise you'll pay more if you opt for a vehicle with a high depreciation rate.

And make sure you protect yourself by reading the lease agreement thoroughly. You don't want to discover at the end of your lease any surprise clauses mandating extra fees. When reading the agreement, pay special attention to:

• The Federal Consumer Leasing Act Disclosures. This houses all of the payment breakdowns.

• Wear and tear specifications.

• The mileage allowance section.

• Conditions regarding early lease termination.

• Information on Gap Insurance (also known as Gap Protection). This covers you against early termination fees resulting from theft or accident.

• Amount of required insurance coverage.

• Whether you're agreeing to an open-end or closed-end lease. An open-end lease requires purchasing the car, while a closed-end lease allows you to walk away at the end of your agreement.

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