Buy or Lease Your Next Car?

Before the economic bubble burst, deciding whether to lease or buy a new car took some time and thought. Then the bottom dropped out of the car market and the residual value of a leased car (the amount it’s worth when the lease is up) got so low that car shoppers stopped leasing and Chrysler and GM got out of the car leasing business. Now the question is back on the table, as car makers unveil leasing incentives to unload excess inventory.

Crunching the numbers to compare leasing versus owning is an essential step in the decision process, but car shoppers should weigh other factors, too. In addition to balancing lower lease payments against the rebates and financing deals available to car buyers, you should take a look at factors like your credit score and your driving habits. Your credit score can be crucial because only those with good-to-excellent credit will qualify for those 0% financing deals. The bar is set even higher for leasers, however, and only those in the top tier qualify.

Also, if you put a lot of miles on your car, leasing may not be for you. Most car leases charge an excess mileage fee, typically about 15¢ a mile, if you go over the limit, which is generally between 10,000 and 15,000 miles a year. Leasing may be a bargain, on the other hand, if you expect the turmoil in the auto industry to lower resale values. If you hang on to the car for the life of the lease, the loss in value becomes the bank’s problem instead of yours.