Is it better to get a LOAN or get a LEASE for a vehicle?

Answer 1

Hi Tyff,

It depends on your goals. Tghe mileage allowance is generally 10,000 miles a year and then $0.20 a mile for everything over. If you drive a LOT it could be a problem.

Also look at the depreciation or how well the car holds it's value.

Say you lease a $40,000 car for three years and the residual is $20,000 after the three years. If the car has a value of $25,000 at the end of the 3 years, you are ahead. If it is worth $15,000 then you have to come up with the difference. Typically they just put the $5,000 shortfall into a new lease and you have been had.

The good thing about a lease is that YOU can drive a HOT car for a reasonable payment because you are basically making payments on the value less the residual. They just get you on the back side.

I guess the positive thing about a lease is that you can drive more car than you can really afford.

If you buy you finance the WHOLE amount, but it is yours when you are finished. If you get a 5-year loan and drive 20,000 miles a year then the car will have 100K miles when it is yours and will probably require some major work.

The real decision point is your driving habits; if you can stay below 10,000 a year then a lease might work if you lease a car that holds it's value well (say a Lexus or a high end Honda)

I have leased and got BIT with the mileage. I had two new Audis when that unintended acceleration story hit 60 Minutes and the value went in the toilet.

I bought my last car new in 1993 and still have it; NO payment is nice. It looks new and went 200,000 miles before I had to put in a new motor and transmission.

So I hope that this gives you some food for thought.

Good Luck,
Jacques

Answer 2

With a loan you buy the car and when it's paid off you still have a car. When a lease is done you turn the car back in, sometimes must pay milage penalty as well and you have nothing to show for all that money.

Answer 3

We've done both, and buying is the way to go. Especially with interest rates being low (or even no interest on some.) That mileage restriction can be awful at payoff time.