Car Buying or Leasing: How to Choose

It can be a difficult task to decide between car buying and leasing. Deciding whether to buy or lease that new Hyundai or Mercedes takes some careful thought and consideration. However, making the correct decision is relative to your own driving and spending preferences.

To decide if you want to buy or lease a vehicle, ask yourself some simple questions:

• Will you put a large amount of miles on the car (over 12,000 to 15,000 per year)?
• Do you wish to own the vehicle?
• Do you hope to eventually be free of monthly car payments?
• Will you want to modify your car? (paint it, install aftermarket parts, etc)?
• Are you comfortable with selling/trading-in the car in the future?
• Do you prefer to have one car for many years, as opposed to a getting a new car every few years?
• Do you want to get the absolute most value out of your money in the long term?
• Are short term savings less important to you than long term savings?
• Will your driving habits put a large amount of wear and tear on the car?
• Are you OK with spending a few thousand dollars for a down payment?
• Does the full retail price of the car fall within your budget?
• Are you willing to pay more money per month to own the vehicle?
• Are you prepared to pay for repairs once the manufacturer's warranty expires?

Take the time to think about and answer these questions. If you answered "yes" to most of the questions, buying may be a better option for you. If you answered "no" to most of the questions, leasing a car may better fit your lifestyle.

Keep in mind that each question can be weighted differently. For example, if you answered "no" to most of the questions, but you still plan to put a lot of miles on the car, you should still consider buying. If you go way over your mileage limit, a dealer may hit you with hefty overage charges that can cancel out the other savings you'd be getting with a lease. If you answered "yes" to most of the questions, but you cannot afford a down payment or higher monthly payments, then leasing may be your only option. Otherwise, you'd have to look into buying a cheaper car. You must weigh the costs and benefits of leasing and buying relative to your situation.

If you just want to have a new car every few years and you do not plan to drive a large number of miles, you should seriously consider leasing your car. If you are an enthusiast who wants to modify the car and doesn't want to worry about usage limits, buying may be right for you. Also, remember the differences in payments. A lease will cost you less money up-front, but it has the chance of hurting your pockets in the long term. Buying will cost more money initially, but you will retain the possibilities of eventually being free of monthly payments and/or selling the car. Finally, determine how comfortable you will be with maintaining your car once its warranty has expired. When you lease, you will not usually have to worry about out-of-warranty expenses.

Understand what you want to do with your vehicle and how you are willing to spend your money. Once you have, you should be able to make the best choice.