Buy or Lease a New Car?

5/22/2008 Trying to finance a new car can be like maneuvering through an obstacle course.

You can get "stuck" trying to figure out if it's better to get a loan or take out a lease. The web has countless online calculators, all offering to help consumers make their "car loan or lease?" decision.

Tobie Stanger, Consumer Reports, says "Online calculators can be great, but they may not tell you the whole picture. For example, they may not capture the financial data like sales tax, insurance costs, or acquisition fees."

Consumer Reports says insurance is an important consideration to factor in. Because a leased car may be more expensive to insure than one you purchase.

Consumer Reports, using the most common financing options, calculated the difference between taking out a five-year loan versus leasing a vehicle for five years. Factored in was getting a new lease after three years.

The first comparison was on the 2008 Honda Accord EX. It sells for $24,495 and can be leased for $239 a month. Consumer Reports calculates leasing it costs almost $4,600 more than if you'd purchased it.

Stanger says, "That calculation doesn't even include the end-of-lease costs, which can include excess mileage and wear-and-tear charges."

Vehicle number two: the 2008 Lexus ES 350. It sells for $38,405 and can be leased for $429 a month. Consumer Reports calculations show leasing costs $9,245 dollars more over a five-year period.

"Monthly lease payments have dropped dramatically in the last five years, some 44%, so they can seem really attractive. But that doesn't necessarily mean you're getting a better deal," says Stanger.

So for a smoother financial ride, buying instead of leasing will put you on track for savings.

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