Buying a Car : Buy or lease?

There is, of course, a way to get a car without buying it – and no, we’re not talking about grand theft. In some cases, it may be a good idea to lease a new car, which basically means that you pay to use the car for a few years.

Here’s how it works: You put money down and make monthly payments, just like buying a car, but you don’t own the car – and at the end of a predetermined period, you return the car to the dealership. It’s not for everybody, but leasing has some advantages. Briefly, the pros and cons:

The upside: Leasing comes with lower monthly payments than buying, and there’s usually a much smaller down payment, so it can be good for people who want a new car but don’t have a whole lot of cash right now. When the lease is up (usually after three years or so), you can either give the car back or buy it as a used car.

The downside: The car may feel like it’s yours, but it’s not. You’re actually paying the dealer (or more accurately, the leasing company) a premium to cover the depreciation on your vehicle. In other words, when you give it back to them, they have to sell it as a used car, which is worth a lot less. So when you return the car, you’ll be charged extra for anything that lowers its resale value – for instance, if you put too many miles on it or you bring it in with dings on the doors.

You’re also locked into the lease for the specified term. If you decide you want out of your three-year lease after two years, you’ll have to pay the remainder of the lease, plus any termination fees. And if you plan on buying it at the end of the lease, you’ll end up paying a lot more when you add together the leasing cost and the cost of buying the car. If you think you’ll want to hang onto the car, you’re probably better off just buying it outright.

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