Do I Lease or Do I Buy?

I was always under the impression that leasing was a poor financial choice versus purchasing. But I've since learned that it depends a great deal on the circumstances and priorities of the decision maker whether leasing or purchasing is the best choice. You need to think about your lifestyle, how much flexibility you require and the priority you place on having a newer vehicle.

Before car shopping, you should review your insurance requirements and the cost of getting gap insurance protection for a lease. Gap insurance is a must for leasing. If you get in an accident with a leased car, you are responsible for replacing it. Gap insurance covers the "gap" between what your auto insurance company pays if your car gets totaled and what you might still owe to the finance company.

Before leasing or purchasing a new car, look at what you might have available for a down payment, check into car insurance and review these key considerations:

• Safety and Warranty Protection. If it is important to you to have a newer vehicle covered by a warranty and loaded with the latest safety gadgets, than leasing might be your best choice. If you don't mind having to pay for some repair items later in the life of a vehicle, then buying could be your ideal choice.
• Lifestyle. If you properly maintain your car, drive an average number of miles and keep a clean interior, leasing might be a good option. Fifteen thousand miles is the average yearly amount allowed in most leases. Anything above that and you might have to pay extra. It is possible to pay for additional miles up front and this will be cheaper than paying penalties for driving too many miles at the end of the lease.
• Flexibility. Getting a new vehicle every 2-3 years is easier with leasing. You don't have to worry about selling or trading in a vehicle. But if you plan on moving in the next 2-3 years, transferring a lease to a new location might be more difficult.

The decision to lease or buy ultimately comes down to the priorities of the decision maker. Leasing can be more expensive in the long term since purchasing a car allows the owner to drive for several years (hopefully) without a car payment or excessive maintenance costs, but for the right person, leasing can be an attractive option.