When to Lease a Car?


Leasing a car is not for everyone, so you need to know when is the right time for you to lease a car and when you should buy one. Many of the factors that go into making the decision are dependent on who is making the decision -- what is right for one person may not be right for another.

Monthly Payments

If the monthly amount you will pay for a vehicle is a big concern or you want a lot of car for the least amount of money, then you may want to lease a vehicle. For the same car, the monthly leasing amount will be significantly less than the monthly payment if you purchased the vehicle. According to Leaseguide.com, with all factors being equal, the monthly lease amount will be 30 to 60 percent less. This is usually true even if the interest on the lease payment is higher than the financing rate on the car loan payment.

Keeping a Nearly New Car

If you like to have a new car every few years because you like the look and low maintenance of a new car, then leasing is probably right for you. With a lease, you are changing cars every two to three years. On the other hand, if you intend to maintain your vehicle and hold onto it until it is no longer drivable, then your choice would probably be to purchase a vehicle because, for long-term usage of a vehicle, it is the cheaper option.

Investment Capital

When you make a payment for a vehicle, either purchased or leased, you are paying for an asset that is losing value. You can minimize this loss by extending the life of the vehicle, which is an option you have if you purchase it. However, with leasing, the way to minimize this loss is to use the difference between a purchase payment and a lease payment as investment capital and put it into a savings account or mutual fund where it will actually gain interest instead of lose value.

High-Crime Area or High-Risk Driver

If you live in a high-crime area or are considered a high-risk driver, leasing can offer you an advantage that purchasing cannot. Most car leases include gap coverage insurance that will pay the difference between what you own on your lease and what the value of the vehicle is if the vehicle is stolen or totaled in an accident. Because new cars lose value more quickly than older cars, gap coverage is a necessity for someone who leases his vehicles. Otherwise, if the car was stolen, you would have to pay the difference between the remaining lease value and what the insurance company pays you for the vehicle.

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