Purchasing Versus Leasing

Purchasing and leasing are two different methods of automobile financing. Each one has it's own pros and cons.

To say one is better than the other really depends on your personal preference and financial situation. It really comes down to what is most important to you.

When you purchase a car, you pay for the entire cost of a vehicle, regardless of how many miles you put on it. Most of the time you will make a down payment, pay sales taxes, and pay an interest rate determined by the company that funds your loan. Your payments often begin a month after you purchase the car.

When you lease a car, you pay for only a portion of the vehicle's cost during the time you're driving it. You may have the option of not making a down payment, you pay sales tax only on your monthly payments, and pay a money factor that is similar to the interest rate on a loan. With leases, you may also pay extra fees and possibly a security deposit that you don't pay when you purchase a car.

First, take a look at your finances. The biggest difference between buying and leasing is that you can get into leasing a car with little or no money down and you probably can afford a much nicer car with more amenities than if you purchased a car.

Some people have trouble dealing with the purchase price haggling treatment, and lease deals usually are set at a specific price for a specific car. Plus, you don't have to struggle with selling your vehicle when you decide to get another one; you just turn in the leased car. If specified in the lease, if at the end of the term you like it so much you can't part with the car, you can buy it then, and either come up with the cash or refinance through the dealership or your local bank or credit union. It's like buying a used car, but you were the original owner.

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