Leasing vs. buying

Billionare J.P. Getty once addressed the financial reasoning of leasing a vehicle over purchasing by noting that "an automobile is a depreciating liability, not an appreciating asset." Leasing gives you the option to take the whole car home but only pay for part of it. There are many reasons why you might consider leasing over buying outright. These include:

1) That New Car Feeling

You can lease a car for two years, turn it in, and lease another for two years - you're not stuck with the vehicle until you pay it off or get tired of it. Did you know that 87% of consumers attempt to trade in their vehicles at around 27 months of age?

2) Peace of Mind

You can participate in what we call a "planned trade cycle," thus the vehicle you drive will always be relatively new and, as such, under factory warranty.

3) Controlled Cost of Driving

 

You know what your payments will be every month, you don't have to worry about adding in the cost of repairs as your car ages.

4) Guaranteed Future Value

The manufacturer guarantees a specific future value in advance for your vehicle at the end of your lease, providing that you turn it back in and it is in the agreed-upon condition and at or under the agreed upon mileage. If your car is actually worth more than the guaranteed value when you turn it in, you get a check for the difference! If it's worth less, you don't owe anything.

Leasing provides options instead of obligations. It's a great way for many consumers to get a vehicle. Even if you drive more miles than average, the cost of factoring in additional mileage may still be less than the wear and tear costs associated with maintaining a purchased vehicle over time. Vehicles are generally in the "prime of their lives" during the average lease period.

Some manufacturers build the cost of gap insurance into the lease, some charge extra. Regardless, gap insurance is part of a standard lease and ensures that, if you are in an accident and the vehicle is totaled, your financial obligation is immediately paid off.

The guaranteed value remains in effect even if you have a more minor accident, as long as the vehicle is properly repaired before you turn it in. If you owned the vehicle, you would have to contend with the consequences of accident reports on your vehicle's Carfax when you attempted to trade it in or sell it. No such concerns with a lease.
 

Some manufacturers offer "wear and tear" warranties which can offset the cost of having to pay for unusual wear and tear on your leased vehicle.

In short, leasing may be a great option for many consumers. Those that drive a lot of miles are probably better off with an outright purchase. Explore the possibility and find out if it might be a smart alternative for you!