By Alexander Carl on March 23, 2010
.jpg.aspx) Car commercials scream at us about leasing or buying their latest model, quoting the option with the lowest payment. But it makes you wonder— if you could purchase a vehicle, why would you not choose to own it? Or, why would you pay full price if there was a less expensive way to drive?
This choice doesn’t have to do with saving money or getting ripped off; it comes down to how you plan to use your vehicle.
A good analogy here is renting an apartment versus staying in a hotel room. In the short term (as in a few days), a hotel room is always the better and less expensive option. The room is furnished, and utilities and maid service are part of the cost.
In a medium length of time (say a month or two), things are a little trickier. The nightly charge of that hotel room starts looking pretty hefty compared to a down payment and rent. Of course you need to provide furniture, but you also have a kitchen, multiple rooms, and the ability to change your space.
In the long term (more than a few months), a hotel room is ludicrous. After the initial expenditures, all that’s needed to keep an apartment are rent and maintenance costs.
The same is true for leasing or buying. So, what are your plans for your vehicle?
If you enjoy having the latest model, drive fairly consistent distances, and don’t plan on any customization, you are a leaser. Just like that hotel room, you pay by the mileage you put on the car. Your payments are always lower than car loan payments.
You have the option of purchasing the vehicle at the end of your lease period, but that’s the depreciated value of the car after you already paid your lease (AKA a rip-off). Most leasers opt to lease another vehicle, so you shouldn’t get too attached.
If you want a car for the long haul, either literally or figuratively, buying will always be better. Once you finish your payments, that vehicle is yours. You aren’t charged for its use, and no one will make you get rid of it.
Ask yourself: what do you need?
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