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Lease vs. Buy

Which is better to lease or to buy? Because this is a complex question, the correct answer is "It depends".

Whether you lease or buy, in both cases you finance your purchase. When you lease, you finance the use of a vehicle, and when you take a loan, you finance the purchase of a vehicle. It is not possible to say which option is better, you can only decide which is better for you, because each has its own benefits and drawbacks.

If you prefer to have a new vehicle every two or three years with no major repair risks and are willing to pay a little more over the long haul to get those benefits, you may consider leasing. If however ownership and long term cost savings are more important and higher initial monthly payments and maintenance costs are not a problem, then buying can be the better choice.

The principal difference between leasing and buying is that when you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it, and when you lease, you pay for only for the portion of the vehicle's cost, which you "use up" during the lease contract. That means of course that leasing offers significantly lower monthly payments than buying. Indeed, you will own nothing at the end of a lease but the buyer too doesn't own the depreciated part of the vehicle at the end of his loan.

Once again, the benefits of leasing are numerous lower monthly payments (because you're only paying for the portion of the car that you actually use), you will be able to drive a brand new vehicle every two to four years, fewer maintenance headaches (the lease contract usually is for a period covered by the manufacturers warranty). Leasing however requires more discipline, financial planning and careful examination of your motives for such choice.

There are a couple of things you want to consider before making a decision to lease.

First, you must make sure that you will not have to end your lease early. Lease contracts have severe early termination charges precisely to discourage such practices. Therefore, you must have a stable financial condition and lifestyle to minimize the possibility of needing to terminate early.

If you plan to drive your car a lot or if you don't intend to keep it in a perfect condition, this might turn to be pretty expensive when the time comes to return the vehicle. There are excess mileage charges and you are expected to return the car with no more than "normal" wear-and-tear. You may find that everything that is above "normal" will be pretty expensive to restore.

Similarly, you may not be able to customize your car, make modifications, or repaint it, as you might normally want to do with a purchased car. Remember that the leased car does not belong to you; it belongs to the leasing company.

If you find yourself emotionally attached to your cars, it may be a better idea to buy them, as it will be difficult for you to turn them back to the dealer at the end of the lease contract. On the other hand, if you like to own the latest cool models, then leasing is the right option for you (albeit more expensive in the long run).

As a last word, if you are not sure what to do, you'd better buy your car with an auto loan, because buying is less complicated than leasing and the probability that you make a costly mistake is smaller.


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