Should People Lease or Purchase?

Leasing may be a good choice under certain circumstances. For example, if consumers use a vehicle in easy-wear situations only and for only the distance specified in the lease mileage terms. Also, it may pay to lease a car if the monthly payments for the lease are lower than those for a car loan to purchase that car. To calculate how to compare car loan payments with lease payments, follow these steps:

  • Determine through negotiation the lowest possible price so that it is no more than $200 over the dealer invoice.
  • Add sales tax and other up front costs applicable to purchasing and to leasing.
  • Add the relevant figures in each case to arrive at the gross purchase price and the capitalized cost for the lease.
  • Subtract from each of these figures the trade-in value if applicable.
  • Subtract from each of these figures the amount of the down payment. Ideally, 20 percent of the figure calculated in the immediately preceding step should be put down for a purchase and nothing should be put down for a lease. This calculation gives the customer the net purchase price for buying and leasing.
  • Next add the respective finance charge for leasing and purchasing. For a lease this amount will be listed as a rent charge. This will give the total cost in purchasing and leasing.
  • Finally, divide each figure by the number of payments required.

After the comparative costs have been determined, customers need to remember that if they buy their cars, they will have a vehicle to sell the next time they enter the car market as consumers.


Inside Should People Lease or Purchase?