Buying a Car Versus Leasing

There are different considerations for buying a car versus leasing a car when it's a used vehicle, but let's address the buy versus lease decision for a new car. That's the one most people get a little confused about.

Some would argue that you should never lease a new car, because you end up paying a lot of money and you don't end up owning the car at the end. A good point, but like most financial decisions, "never" is probably too strong a word. You have to do the math.

First, understand what you're getting when you buy a car and when you lease a car.
When you lease a car, you're paying only for the value of the car that you use during the lease period. For example, if you're leasing a $25,000 car that will have an estimated resale value of $15,000 after 36 months, you'll pay $10,000 (the difference) as the major part of your lease. That's depreciation. You'll also pay a down payment, a finance charge and other fees.

If you buy that $25,000 car, you'll pay the full $25,000. Most people get a loan to do that, so you'll be paying a finance charge as well. And you'll still pay that down payment and those other fees, just like when you lease.

Leasing will almost always cost you less per month than buying will initially, because your monthly lease amount is a fraction of the depreciation of the car's value over the term of the lease. That's always less than the total purchase price of the car.

So is a lease always the right option because the monthly payments are lower? Not if you plan to drive your car for many years after you pay off a car loan. In that case, the purchase price of the car gets spread out over a much longer time period.

If you lease cars for roughly three years each, but you drive a car you buy for twelve years, you'd have to lease four cars during the time you'd drive one you bought. By the second or third lease, you'd almost certainly be starting to pay more auto cost than you would be if you had bought a car and were still driving it.

Leasing a new car is always more expensive than buying a new car in the long term. In the short term, leasing is always less expensive. If you buy a car and sell it at the end of your loan term, you'd probably end up paying roughly the same amount as you would have if you returned a vehicle at the end of a lease.

In the end, you'll have to do the math for yourself to determine whether it makes more sense for you to buy a car or to lease a car. You can Google "buy versus lease calculation" and find several nice calculators to help you decide.

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You can get a free, 100 page printed catalog mailed to you by visiting the Adsitco.com Mercedes parts website.

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