Leasing vs. Buying a Car

Leasing a car is becoming increasingly popular. Almost a quarter of new car transactions last year were leases -- a record. People who lease are just about as satisfied with the value of their cars as people who buy theirs, according to the latest Consumer Reports reader survey -- 66 percent compared with 69 percent.

Luxury cars are the most likely to be leased. Jaguars, Infinitis, BMWs, Mercedes, Lincolns, and Cadillacs top the list. About a third of the new-car transactions for each of those brands are leases.

Leasing also creates brand loyalty. The survey found that people who leased their last car were twice as likely to get the same brand again as those who bought their last car. The big attraction to leasing is the lower monthly payment. You can drive a pricier car than you might be able to afford to buy.

Leasing a Hyundai Sonata, for instance, can cost as little as $199 per month with a

$1,900 down payment. Monthly payments on a five-year loan for the same car would be about $350 depending on the terms.

But Consumer Reports says a lower monthly payment should not be the only consideration. When you lease, you're essentially renting the car long term, and you own nothing at the end of the contract. With a purchase, you'll almost always have some value in the car at the end of the loan. And with a lease, you can face extra costs if you terminate it early or exceed the mileage limit, usually about 12,000 15,000 miles per year.

The survey also noted the main reasons people decide against leasing: They think they'll save money by buying, they plan to keep the car longer than the leasing terms, and they don't want the mileage limit.