Every person who buys a car has to decide whether to pay cash up front or give up ownership and pay monthly payments instead. Should you buy a new set of wheels or rent them?
As with any other common problem, there is no clear-cut solution. Each choice has its own pros and cons, and which one you choose depends on a number of financial and personal factors.
First, look at your money. Affordability is obviously important, and you should ask yourself how stable your job is and how good your overall financial situation is. Leasing has much lower short-term monthly costs than buying. This is because you only pay for "the portion" of the car's cost that you use up while you drive it.
If you have a lot of cash up front, you can choose to pay the down payment, sales taxes (in cash or as a loan), and the interest rate set by your loan company. Buying a car gives you the feeling of "free driving" because you own it. It also gives you a way to get around.
Leasing is a good option if, for example, you want to drive a luxury car but don't have the money to pay for it all at once. It's different from buying in that you don't have to pay the down payment right away. Instead, you pay a lower money factor that is usually similar to the interest rate on a loan. But these benefits come with a cost: if you break a lease early or don't make your monthly payments, you'll have to pay a lot of money and damage your credit. You need to set aside money in your budget every month for the lease payment for the foreseeable future, or at least for the length of the lease.
Whether you buy or rent depends on more than just money. It also depends on your lifestyle choices and preferences. Think about how you feel about your car. Are you the kind of person who bonds with their car, or would you rather try something new? If you want to drive a car for more than five years, negotiate carefully and buy the car you like. If you don't like the idea of owning a car and would rather get a new one every two to three years, you should lease. Next, think about how you will get around: How far do you drive every year? How well do you take care of your cars? If you say, "I drive 40,000 miles a year and don't care much about my cars because I don't mind paying for repairs," you should probably buy. Leasing is based on the idea that you won't drive more than 12,000 to 15,000 miles a year and that there will be wear and tear. If you don't stay within the mileage limits and keep the car in good shape at the end of the lease, you might have to pay a lot of money.
