Leasing vs. Financing a Vehicle

Looking at buying a new vehicle, but you aren't sure if you should lease it or buy it? Firstly, let's make sure we understand what each option means.

LEASING - When you lease a car, you are only paying for the portion of the car you use. You pay to drive the vehicle, usually for two to four years. Leasing is generally cheaper than taking out a loan to own the car because you're only paying the depreciation costs for the time period that you drive it. 

FINANCING - With this option, you take out a loan to pay for the entire cost of the vehicle and taxes. You can choose to put down a downpayment at the begining or you might have a trade-in that would reduce the initial cost of the vehicle. Your monthly payments are typically higher but, once you have paid off the loan, you have an asset to keep, sell or pass on.

If you like to get a new vehicle every two to four years because you like technology and having no worries, leasing is probably your best option. Or, if you are cash-strapped, leasing will be a cheaper way to own a new vehicle. If you are in commission sales, or own your own business, you may be able to write off your monthly lease costs against your income. However, you do need to return the vehicle in good condition and within the mileage restrictions you agreed to, or you won't be able to just hand the keys in and walk way. But you do receive a guaranteed value for your vehicle at the end of the lease. Should the market appreciate, you have the option to purchase your vehicle for the buyout price and trade it in or re-sell it and take advantage of that equity. However, with a lease, you will always have monthly payments.

If you purchase your vehicle, eventually you will pay it off and, assuming you've chosen a well-made vehicle, you could drive it for years after the loan is paid out, so you won't have monthly payments forever. However, should you get into an accident, or the vehicle market depreciates, you will take the "hit" on that depreciation should you want to sell or trade in your vehicle.

Ultimately, leasing is great for those who want lower monthly payments and enjoy driving the latest and greatest. But for those who want to drive a car for a longer period of time without worrying about the mileage used, financing will be the best option.