Every article, book, or web site you'll ever read about car leasing addresses this classic question.
Summary reasons for leasing your car....
The answer usually involves financial analysis and comparisons of the two options (leasing vs buying your car) — typically ignoring the fact that the consumer may have interests other than overall long-term cost that can't be factored into a simple financial comparison.
Although the authors of these writings often go into great detail, providing lease-buy calculators and the obligatory side-by-side cost analysis, the answers always come out the same — though frequently presented with a biased slant that reflects the author's particular viewpoint.
Lease or buy?
Let's simplify the answers and summarize them here:
1. The short-term monthly cost of leasing is always significantly less than the cost of buying.
For the same car, same price, same term, and same down payment, monthly lease expenses will always be 30%-60% lower than loan payments. This is still true even when compared to 0% loans.
2. The medium-term cost of leasing (2-3 years) compared to buying is normally less by £30+ per month than the cost of buying, assuming the buyer sells the vehicle.
The overall cost of leasing compared to buying, over the same lease/loan term, is usually cheaper and this is assuming the buyer sells the vehicle at the end of the loan for an assumed full retail value! Comparisons sometimes show buying to cost the same as leasing due to one reason or another and also the assumption that a purchased vehicle will return full market value if it is sold or traded at the end of the loan (often a bad assumption). However, if the benefits of wisely investing the capital cost outlay between buying and leasing, the net cost of leasing is less than buying.
3. The long-term (4 to 5 years) cost of leasing is always more than the cost of buying, assuming the buyer keeps the vehicle.
If a buyer keeps his car after the loan has been paid off and drives it for many more years, the cost is spread over a longer term. It doesn't take rocket science to figure out that the cost of buying one car and driving it for ten years is less expensive than leasing or buying five different cars over the same period. If long-term financial benefits were the most important objective in acquiring a new car, it would always be best to buy the car and drive it for as long as it survives — or until the cost of maintenance and repairs begins to exceed the cost of replacing it. However, many automotive consumers have other objectives that reduce the importance of long-term cost savings.
So, which is better, lease or buy?
It depends on what's most important to you. All of us have different lifestyles and priorities in life — and in cars and finances. Car leasing and buying decisions must be made with those lifestyle and priority attributes in mind. What's right for one person can be totally wrong for another.
If you enjoy driving a new car every two or three years, want lower monthly payments, like having a car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about ownership, drive an average number of miles, properly maintain your cars, and are willing to pay more over the long haul to get the benefits, then you should lease.
If you don't mind higher monthly payments, prefer to build up some trade or sales value, like the idea of ownership, like paying off your loan to be payment-free for a while, don't mind the possible cost of repairs after the warranty has expired, drive more than average miles, prefer to drive your cars for years to spread out the cost, like to customize your cars, and don't like the risk of lease-end costs — then you should buy.
But before you make your lease vs buy decision, read the next few topics on Car Leasing vs Buying. There's still more to it.
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