Is buying a car better than leasing one?

We've looked at the advantages and disadvantages of leasing a car. If you feel the bad outweighs the good when it comes to leasing, is buying a better option? Again, it depends on a number of factors including lifestyle and family choices, your budget and whether you plan to keep the car long term. Let's look at the pros and cons of buying.

Pros to buying a car

There are several advantages to buying a car. When you buy it, you actually have something at the end of making all those payments whereas, with a lease, you have nothing but a new payment on a different car. The car is yours for as long as you want to keep it. As long as you're not interested in having the newest, nicest models, your car should last at least 10 years or 100,000 miles. You'll have no more payments until you decide to upgrade; with leasing, you'll always have a payment. If you do decide to buy a new car after yours is paid off, you can either trade it in or sell it privately. The latter will usually get you the most money toward a new purchase. Buying a gently used car is often the best option. By the time it's a couple of years old, its depreciation isn't as rapid. It's also easier to save up to pay for a used car with cash than to purchase a brand new car outright.

Cons to buying a car

Financial expert J. Paul Getty has said, "If it appreciates, buy it; if it depreciates, lease it." Cars definitely depreciate from the moment they're purchased and leave the lot. Your options for buying a car are paying cash or financing. Those who pay cash will end up paying the least. How many people, though, have $20,000 or more available to buy a car outright? Not many. That's why financing is so popular. Financing, like any form of borrowing, adds interest to the total purchase amount. The terms of your financing agreement depend on the amount you pay down and your credit rating. Those with great negotiation skills and stellar credit stores can often get really good deals. If your credit is spotty, however, you may end up paying a considerable amount more for your car.

As you can see, there's no blanket answer to the question, "Is it better to buy or lease a car?" Everyone's circumstances are different. Generally, though, if you want to change cars frequently and drive the most reliable vehicles, leasing is your best option so long as you're prepared to pay the extra fees at the end of the lease, if applicable. If you don't mind driving a vehicle for 7-10 years and don't want to always be making payments, buying is the better option.

Photo courtesy of Lindsey Turner via Flickr.