For most people, the answer to this question will come down to dollars and cents. To those for whom money isn't as much of an issue, there are other things to ponder.
A list of advantages and disadvantages can help you determine whether to buy or lease. For those who are still on the fence, here are some more things to think about:
How do you treat your cars?
Want to repaint, customize, or add racing stripes? Then expect to have them undone, and then expect a bill in the mail. The car doesn't belong to you while you lease it, so you can't make changes to it.
Are you tough on your cars? Or irresponsible? You will be responsible for any damages and any wear and tear that is deemed excessive. Leasing does not let you off the hook for these.
Are your finances stable?
Your financial situation should be stable if you want to lease, because you will be committed to your auto. Ending your lease early will cost you extra, and you may also have to pay all the remaining payments.
Ask yourself whether you might be hit soon with high healthcare costs, mortgage costs, or other expenses that could jeopardize your ability to make your lease payments.
How much do you drive in a year?
Estimate how much you drive in a year. Is it more than the amount specified in a lease, meaning between 10,000 and 15,000 miles? If it is, you'll be hit with excess mileage charges when the lease ends. Can you reduce your mileage in other ways, such as by biking, walking, or bussing? If not, consider those excess mileage costs and whether they would be a hassle for you.
How is your credit?
You need a very good credit rating in order to lease. One reason for this is that the leasing company bears a lot of risk when it offers you the lower monthly payments. If your credit is poor, you may pay a higher lease rate (which is factored into your monthly payments). Do you know your credit score?
How do you really feel about leasing and buying?
Some people just like to own, so buying appeals more to them. They can build up some equity, which owning allows them. Leasing doesn't build you equity—at least not until you decide to buy at the lease end, if you do at all. Another plus for buyers is that eventually, they can stop making payments and own the car outright.
On the other hand, some people would rather not have any ownership. It is the convenience factor that they like and are willing to pay for. That convenience includes a lower chance of needing repairs and a high likelihood of having warranty coverage for the duration of the lease.
Dive deeper: Car leasing: Everything you need to do
This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.
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