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Should I Buy or Lease My Car

Should I Lease?

Although you may be attracted to the many benefits of new car leasing, you should consider the questions below before making a decision. If you answer yes to any of the questions, it's a good indicator that leasing may not be right for you. To do otherwise could cause you a great deal of unhappiness and unnecessary financial pain.

Do you think you would want to end your lease early?

Car lease contracts are purposely written to discourage, even prevent, early termination. To do so usually means you'll pay termination charges and all remaining payments. Therefore, if you lease, you should have a stable lifestyle and a good job situation to minimize the possibility of needing to terminate early. Wanting or needing to end a lease early is the most common problem people have with leasing.

Do you typically drive your cars more than 15,000 miles per year?

New car lease contracts limit the number of miles you can drive to 10,000-15,000 miles per year. If you exceed your limit, you're slapped with excess mileage charges at the end of the lease. Sometimes, additional miles - if you know you'll be driving more - can be bought up front at the time you sign your lease, at a lower per-mile cost.

Do you think you'll want to customize your car, make modifications, or repaint?

A leased car doesn't belong to you, it belongs to the leasing company. Therefore, you cannot make modifications and install custom equipment that alters the car. If you do, you'll likely be charged for the cost of repairs to undo what you've done.

Do you mistreat your cars or fail to keep them in good condition?

Leasing companies require that you return their car at the end of the lease with no more than normal wear-and-tear. Anything more and you'll pay for the damages. You are responsible for insurance, upkeep and maintenance just as with a purchased car. Some people mistakenly believe the leasing company is responsible.

Do you prefer fad cars or cars that frequently change style?

These types of cars usually lose resale value quickly, which means their lease residual value is lower. Low residual value translates into higher monthly lease payments. This kind of car could easily have a higher monthly lease payment that a more expensive car with a better resale history.

Are you emotionally attached to the idea of owning your vehicle?

When you lease a new car, you have no ownership during your lease, unless you choose to buy at lease-end - which about a third of all leasers do. Leasing is not all that different than buying with a loan, in which case the bank holds the title and you don't own your car until the loan is paid off. It's just that, when buying, you build up equity because of your higher monthly payments and, when leasing you don't.

Do you have a flawed credit rating?

Because leases typically require a smaller down payment and lower monthly payments, you generally must have a better credit rating than would be required for a loan because of the higher risk to the lease provider. If you have a history of making credit payments promptly and don't have an excessive debt load, you're going to fine. Otherwise, you may have to pay a higher interest rate to lease or, worse, be refused.

Do you like paying off your loans and driving your cars until the wheels fall off?

One of the benefits of leasing is that you can drive a new car every two, three or four years, However, you'll always be making payments. To many people, this is an acceptable trade off considering the benefit of always having a new car that is always under warranty. If you prefer to make higher monthly payments but then have a period in which you are payment-free, then buying is a better option for you than leasing.

How's your health?

If you have medical problems that may prevent you from completing a lease, it's better not to lease. Leasing is not like renting. You can't simply return a leased car to the lease company if health problems, or even death, occurs. Leases are financial obligations, similar to loans and mortgages.

So which is better, lease or buy?

It depends on what's most important to you. All of us have different lifestyles and priorities - in cars and in finances. Car lease-versus-buy decisions must be made with your own life style and priority attributes in mind. What's right for one person can be totally wrong for another.

LEASE - If you enjoy driving a new car every two or three years, want lower monthly payments, like having a new car that has the latest safety features and is always under warranty, don't like trading and selling used cars, don't care about building ownership equity, have a stable predictable lifestyle, drive an average number of miles, properly maintain your cars, are willing to pay more over the long haul to get these benefits, and understand how leasing works, then you should LEASE.

BUY - If you don't mind higher monthly payments, prefer to build up trade-in or resale value (equity), like the idea of having ownership, like paying off your loan to be payment-free for a while, don't mind the unexpected cost of repairs after the warranty has expired, drive more than average miles, prefer to drive your cars to spread out the cost, like to customize your cars, expect lifestyle changes in the near future, and don't like the risk of possible lease-end charges - the you should BUY.

To learn more, please feel free to email or call to make an appointment or call 516-887-7945.

  Malverne, NY accountant, Brian Banks

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