Leasing a car can sound appealing.
You get a brand-new car, drive it around for a few years, and then have your pick of another brand-new car to drive around for the next few years.
Who wouldn’t want to enjoy that new car smell more often?
But when you look at leasing from a cost standpoint, it might sound less appealing.
According to Manisha Thakor and Sharon Kedar, authors of “On My Own Two Feet” it’s usually more cost effective in the long run to buy, rather than lease, a car.
The authors point out that when you lease a car, your car payments never stop. Yes, you’re paying money, but none of that money is going toward buying that car.
When you buy, you may have car payments for a while, but you’ll reach a point where you will have paid for the car completely and you’ll be able use your former car payment money for something else.
Then there’s the flexibility factor. According to Thakor and Kedar, when you lease a car you’re subject to mileage limits, and you’re locked into that lease for a certain period of time.
The authors use the example of moving. Say you used to have a half hour commute to work, then you move and your commute increases to two hours. Since you’ll be driving a lot more, there’s a good chance you would exceed your mileage limit before your lease expires, resulting in extra fees.
And, the authors say, if you end up moving to a city where you no longer need a car, but you have time left on your lease, breaking that contract is going to cost you as well.
If want to be able to drive a car that you couldn’t afford to buy, or your car can be deducted from your taxes as a business expense, leasing can be an option worth considering. Otherwise, buying will most likely cost you less and provide you with more flexibility.