How to Decide Whether to Lease or Buy a Car

Leasing can give you more buying power but demands meticulous vehicle care and maintenance.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Calculators
• Car Insurance
• Cars
• Spiral Notebooks
• Calculators

1. Decide whether you have enough money for a down payment on a car. If you don't, consider leasing.

2. Decide whether you intend to own a car for a long time. If you do, consider buying.

3. Decide whether you are going to use the vehicle in a manner likely to damage it - as a work truck, for example. If you are likely to damage the vehicle, consider buying.

4. Find out how good your credit rating is. If it's bad or is mixed, consider buying; leasing requires better credit.

5. Estimate how much you can spend per month on payments. If you can't make high monthly payments, consider leasing.

Tips & Warnings

• Leasing and buying each have advantages and disadvantages. Consult your loan officer or accountant for advice.
• If you total a leased car, you may be financially liable for the balance of payments on its total value.

on 1/18/2006 Don't ever borrow money for more than 5 years on a used car. Don't go more than 3 years. If you cannot afford the payment, leasing may be a good idea for you. Keep in mind you can buy out a lease at any time after the first year in general. If you have a change in your financial situation, you may want to convert your lease to a buy after a few years. Consult with a financial planner first.

on 11/22/2005 If you lease a car, ensure your lease is "closed-end". If "opened-end", your rate, therefore mo. payment, can change any time during the lease. Even though "opened-end" leases are supposed to be illegal, I know (personally) they still exist! Beware!

on 11/22/2005 By making a loan over a 7-8 year repayment term your monthly payment will be about the same as a lease payment. Try to get the lowest interest rate possible -- for example, borrow through a bank line of credit at prime or near prime rates.