When I was young and poor, I always fantasized about leasing a new car, because the monthly payments were so attractive. Of course, with a credit score in double digits, no responsible car company in the world would have leased me a new one.
Now that I’m older and married to a woman with a good credit history, I’m no longer attracted to leasing. We hold our cars for a long time, as witnessed by the 2008 Mazda5 and 2002 Dodge Neon parked in our driveway.
With my perspective out of the way, let’s ponder 5 questions to figure out whether you should lease or buy your next new car. They can help you determine what will work best for you.
How are your finances?
You’ll need good credit to lease. Plus, you still need to come up with a down payment in most cases. Even people with less-than-stellar credit can often find new-car financing with no money down and up to 6 years or more to pay off the loan. Your monthly payments will be lower in most cases with leasing, but your up-front costs will be higher.
Is your credit a little sketchy? Leasing may not be an option.
Are cars passionate or practical to you?
There are two basic reasons to buy a car: passion or practicality. Are you passionate about the cars you buy? Or are they more basic transportation? Passion burns hot and burns out. Leasing will likely be the better option. Is your car more a conveyance? The financial benefits of buying may be more appealing.
Do you favor passion? Leasing might be better.
Do you like the latest technology?
This is kind of a trick question. Modern cars are evolving quickly when it comes to the technology inside. Even a 3-year old car can be outdated. However, a 36-month lease does mean you won’t have to suffer with outdated technology for long. So, why was this a trick question? Your best bet might be buying a car with Apple Car Play or Android Auto. Then new technology will be only a software upgrade away.
Did you answer no? Then buying a new car would work better for you.
Do you fear high repair bills?
Most leases are for 36 months or less. New-car warranties are usually 36 months or more. You’re going to have, in most cases, bumper-to-bumper protection for the entire time you lease your car. You should never have to pay for a repair.
Did you answer yes? Then a lease is your better option.
Do you drive a lot?
Mileage limits on new-car leases can be restrictive, with some as low as 10,000 miles per year. Go over those limits and you will have to pay a mileage charge. (On a Chevy Malibu, for example, you would pay 25 cents per mile.) Going 10,000 miles over your limit on a 3-year lease could cost you $2,500. That sounds like a lot of miles, but it’s only an extra 65 miles a week.
Did you answer no? Leasing might make sense for you.
Do you take great care of your cars?
This is especially important when it comes to leasing, because you are responsible for excessive wear and tear. That’s a subjective term if ever there was one. You will pay for any excessive bumps or scratches. If your interior has lots of wear, you’re going to pay for that, too.
Did you answer no? Leasing could get really expensive when it’s time to turn in your car.
Finally, if you do lease a car, should you buy it when the lease is up? It depends on what the negotiated price for the car was when you signed the lease. Compare your price to current values. Is your car within 5 percent of the value of similar cars? You should probably buy it just because you know the car so well. However, if you have any concerns about the car, give it up. Why gamble on future problems? Leasing another car would allay any of those fears. Plus, most manufacturers have special deals for returning lessees.
Shopping for a new vehicle this weekend?
Bring along CarGurus’ mobile app to help check prices, find good deals, and research cars on your smartphone.