Many car shoppers don’t think twice about whether they will buy or lease a car. The majority of them
automatically decide to buy a car because leasing seems so expensive. But, there are some times when
leasing makes sense.

What is a Car Lease?

When you lease a car, you enter an agreement with the leasing agent to keep the car for a minimum of
six months and pay a monthly lease payment. You can negotiate the lease price the same way you would
if you were buying the car. In fact, you should negotiate the price, but be careful that a price reduction
doesn’t result in increased prices elsewhere in the lease deal.

Myths About Car Leasing

People have the notion that leasing a car is more expensive than buying one, when it fact that’s not
always the case. Buying a car is only cheaper when you keep the car for years after it’s been paid off.
However, if you’re like many people, and trade your car in before it’s paid off, you’re losing money. If you’
re only going to keep a car for a few years, leasing it is a better option.

The monthly payments on a car lease are also anywhere
from 30% to 60% lower than monthly payments on a car
loan. So, you save money on a car lease, if you lease it
for a few years. But that’s only if you would have traded in
a purchased vehicle after the same length of time. If you
plan to keep your car for a long time, it’s cheaper to buy
a car. For example, it’s cheaper purchase a car and
keep it for 10 years than it is to lease a car for 10 years.

Drawbacks of Car Leasing

One of the drawbacks of leasing a car is the audit
process it goes through when you turn it in. The lease
agent will go over the vehicle with a fine-toothed comb to
evaluate the damages done to the car. You’ll have to pay extra fees for anything more than “normal wear
and tear” which could include things like miles over the allowance and excessive dings in the car.

When the lease is over you don’t have any car payments, but you also don’t have anything to drive unless
you decide to purchase the leased car or another one.

Deciding whether to buy or lease a car isn’t just about price. You should also consider your personal
lifestyle in the choice.

When is Car Buying the Better Choice

You should choose car buying over leasing when:

       You can afford higher monthly payments.

       You prefer to drive your car for a long time.

       You can afford to pay for repairs once the warranty has expired.

       You drive more than 15,000 miles per year.

       You want to modify or customize your car.

       You tend to mistreat your cars.

       You want to own a car.

When is Car Leasing the Better Choice

You should choose car leasing over buying when:

       You want lower monthly payments.

       You prefer to get a new car every 2-4 years.

       You don’t want to pay for expensive repairs.

       You drive fewer than 15,000 miles per year.

       You keep your car in good shape.

Qualifying for a Car Lease Contract

You’re typically required to have a higher credit score when you lease a car than when you purchase one.
That’s because leases have lower down payments and monthly payments. If you have a poor credit
history, you might have to pay a higher interest rate on the lease. Or worse, you could have your lease
application denied all together.

This article was submitted by Robert Valentine of Financial and Retirement Management.Robert Valentine is a well-known expert in the matters concerning investors. His articles on financial planning matters that concern investors have been published by several publications throughout the United States.