To Lease or To Buy, That is the Question
My father always told me that you should never lease a vehicle because it was just throwing away money. You will always have a car payment and you will never truly own anything. I understand his way of thinking, but do I really want to own a vehicle that's five or six years old? Or do I want to get a new vehicle every three years?
I will always remember my first lease. It was the spring of 2006, and I wanted a larger vehicle for my growing family. Instead of buying, I decided to go out on a limb and lease a Jeep Liberty… against my father’s sound advice. I chose a two-year, 15,000 mile lease. I put $400 down and had a low monthly payment. (A lot lower than what I would have paid if I had bought the Liberty.)
I worked fairly close to home and ended up putting just around 14,000 miles on the vehicle per year. I loved that Jeep Liberty. Until about three years later when I was itching to get into a new vehicle with better gas mileage. That’s when I turned in my Liberty for a Pontiac G6. This time I opted for a three-year, 15,000 mile lease. The gas mileage was great and I loved the smooth ride.
Then, in 2011 when my lease was coming due, I started shopping around for a new vehicle and stumbled upon a Jeep Wrangler. I had always wanted a Jeep Wrangler, so I decided to buy. I knew this was a vehicle that I would actually want to still own in five years.
I still love my Jeep Wrangler.
Here some tips when making the decision between leasing and buying:
- How many miles do you put on your vehicle each year? If it is more than 15,000 per year, then maybe leasing isn’t for you. At the end of a lease, you’re assessed additional usage fees if you have above-average mileage or wear and tear.
- Do you drive the car for business? When you lease, a portion of the car's depreciation and financing costs can be deducted on your taxes. Interest on loans to buy a car, however, are not deductible.
- How much can you afford per month? Monthly lease payments cover depreciation and taxes only for the time you have the vehicle. That means the payments will be lower than if you buy the same car and take out a loan for the same number of months as the lease.
- Do I want to sell a car? Okay, this may seem easy, but there are a lot of steps you need to take when selling a vehicle. You need to clean up the car, get it ready to sell, show it to interested parties and go through the paperwork.
In conclusion, buying versus leasing is not exactly black and white. Both leasing and buying have their advantages and disadvantages, just like renting versus buying a house. The reality is that buying is generally cheaper in the long run. (My dad would be so proud to hear me say that.) You can calculate potential savings at bankrate.com.