i would like some expert advice about leasing versus buying a new auto?

Question

i do not know which way is the best for me to go. please help

Answer 1

Leasing, you're only paying for depreciation. You DON'T OWN the car.

So if you lease the car for 3 years, you are paying for the difference between what the car is worth today vs what the car will be worth in 3 years.

So say the car is worth $40K today, but 3 years from now, the lease company believes the car will only be worth $18K. Your lease means you will be paying for this depreciated value of the car ($40K-$18K = $22K).

This means over the 3 years you will be paying $22K (+ the interest on that $22K) to drive the car. After the 3 years, you'll need to return the car. Typically dealerships will then allow you to purchase the car for a value that is typically greater than the $18K the car is now worth to them.

The biggest problem with lease agreements is the mileage limitation. You are restricted on the amount of miles you can put on the car. This is fine if you know how much you will be driving the car, but many people don't and many underestimate and end up paying a fine on mileage overage.
You can typically purchase extra mileage at the beginning of the lease for significantly less, and if you can get a good estimate of what you believe you'll be using this will limit your overall cost significantly. The "other" draw back is some people want to get out early on their lease. Most leases do not let you get out early, and you are "locked" in for the full time of the lease.

Most people who try to sell their car after 3 years (or less), owe more money on the car that what it is worth after 3 years of depreciation. Some end up rolling several thousand dollars into the next car the want to "own." These people then take out a $20,000 loan on a car that is only worth $16,000 because they needed to roll $4,000 in negative equity onto their new loan, and the cycle continues to repeat every few years. (Just look at all the people on Yahoo Answers who ask how they can sell their car when they owe more than what it is worth) Owning is not always better. Also if you want to "own" the car for 3 years, you'll be paying interest on the full $40,000 of the car you're purchasing. When you sell it in 3 years, you would have paid more in interest to "purchase" than you would have if you leased. (This of course assumes you'll sell your purchased car after 3 years).

My rule of thumb. If you plan to get a new car ever 3 years AND you can properly estimate how much you'll be driving in those 3 years, leases can be a good deal. As long as you follow those two conditions, you are never upsidedown on a lease payment, unlike those people who purchase, then try to sell the car before 3 years and find themselves rolling over thousands of dollars into their next car loan.

If you plan to keep the car for more than 4 years, or don't have a clue on how much driving you do on a yearly basis. Then purchasing is typically a safer choice.

Answer 2

If you want to pay the same money for leasing that you would for paying off a car and have nothing when your payments are done, then lease. If you want to own a car at the end of your payments, or have a vehicle to trade in next time, buy the new vehicle. I have never seen anyone come out on the good end of leasing.