The decision to buy or lease your car means finding the balance between what fits into your lifestyle, what you value and what makes economic sense.
Putting too much weight on one of those variables can put you in a less than ideal position. For example, not considering the economics and only considering your lifestyle and what you want could look like you buying a car that you can't really afford.
Let's look at some perspectives and scenarios that can help you weigh whether or not you should buy or lease.
If a New Car Is a High Priority
If having a new car every few years is high up on the priority list, leasing is the way to go. You get to trade in the car every two to four years. But buyer beware. If you turn in your car before the lease is up, you could get hit with penalties.
If You Don't Have a Crazy Commute
When you lease a car, there is a cap to how many miles you can drive it. Most car leases have a mileage allowance between 12,000 and 15,000 miles a year. Americans drive an average of 13,476 miles each year. How much do you drive to and from work each day? What about on the weekends? Are you a road trip fiend?
If you can keep within the cap, you'll be in great shape. Going over can be costly. You can expect to pay between $0.10 to $0.25 per each additional mile that you drive over the cap. It depends on the vehicle and the lease company.
If You Want to Keep Monthly Costs Low
If you compare monthly payments, generally a lease will be cheaper. But here's the rub: you will always have a car payment when you have a lease. When you own your car, yes, you can pay it off and drive it until the wheels fall off, but you'll be responsible for cost of maintenance, repairs and upkeep. It's hard to predict what will actually be cheaper in the long run. Make sure to research how much regular maintenance will cost.
You can still keep monthly payments low if you buy a car by putting money down. What's tough about this is you need the money for a downpayment. If you don't have enough saved up, you may end up paying more monthly.
If You Beat Up Your Car
Do you have giant, messy dogs or crazy, destructive children or a job that requires you to lug and load bulky items? Or maybe you just treat your car like crap. If any of those scenarios sound like you, you might want to buy the car. When you return a leased car with excessive dents, interior or exterior damage, you could get hit some extra fees. It might be best to beat up a car you own, but realize your bucket might have a lower resale value.
If You Love the Car Enough To Lease It Again
So you thought you would never find the one. And now you want to go back and lease the same car. Or maybe you want to exercise your option to buy the car. You found the one. Leasing to buy could end up being more expensive. When you buy the car coming off the lease, the dealer might inflate the value of the car. I don't want to make assumptions or be a dick, but proceed with caution when dealing with people who put food on the table by making a commission.
If You Need A Car For Business
If you're looking for a car for business, consider the lease. Disclaimer: please consult with your tax counsel or accountant about your specific situation. But if you decide to deduct auto expenses instead of taking the mileage deduction, lease payments are tax deductible whereas only interest for a car loan is tax deductible.
If you're really concerned about the economics of it all, try this lease versus buy calculator. The major flaw is that it doesn't take into account all the variables that we discussed above, so proceed with caution and make sure to consider your lifestyle and values.
In the grand scheme of things this all might be irrelevant in a decade. What I mean by that is, if technology companies get their way, we might not even buy or lease cars. There's a big chance we'll have subscriptions that allow us to get around town in autonomous vehicles.