Making the Buy-or-Lease Car Decision

Factors include lifestyle plans and driving habits.

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The decision to buy or lease a car goes well beyond a simple monthly budget calculation. While lease deals are often cheaper, they also leave consumers with no equity in their vehicles at the end of the contract. Having trouble deciding which option is best for you? Here are the key factors to consider.

The cost. Manufacturers and dealers often offer subsidies on leases to encourage consumers to drive off in one of their cars. The best deals are usually on slower-selling models. To evaluate whether or not you're getting a good deal, focus on the four factors that determine how much money you will end up spending, says Philip Reed, senior consumer advice editor for Those factors are the monthly payments, the length of the lease, the down payment, and the mileage restrictions on the lease contract. Exceeding the mileage restrictions often leads to hefty fines, and keeping a lease for longer than three years usually forces the driver to pay for new tires and other maintenance costs.

Your budget. While leases usually offer the cheapest short-term deals because they often come with no down payment and low monthly costs, they are almost always more expensive than buying a similar car and keeping it for a decade. Of course, continuously leasing new cars, while more expensive, means always having a relatively new car. Drivers who prefer to replace their cars every few years with a new one save money by leasing instead of buying.

Life plans. Think you may move across country in three years? Or go from being a single professional to the parent of three? For consumers anticipating major life changes, leasing can provide much-needed flexibility. Selling a compact car after three years and replacing it with a minivan, for example, would be more expensive than leasing the first car and then simply returning it.

Driving habits. Leases often charge consumers for any damage to the car, in addition to exceeding mileage restrictions. That's why Art Spinella, president of CNW Research, warns people who drive a lot, or are hard on their cars, such as Rottweiler owners, against leasing. "Excess wear and tear can cost you a lot," he says.

More numbers. offers a buy-versus-lease decision calculator, which considers taxes, financing terms, and other factors to help consumers make their decision.