Should You Lease or Buy a Car?

Leasing a car is becoming an increasingly popular option.
Amy Scher epitomizes the loyal leasing customer. She always leases a Volvo: "We have leased cars seven times. We love leasing. It really works for us." Leasing a car is becoming increasingly popular. Nearly a quarter of new car transactions last year were leases - a record high.

People who lease are just about as satisfied with the value of their cars as people who finance, according to the latest Consumer Reports reader survey - 66% compared to 69%. Leasing also creates brand loyalty. The survey found people who leased their last car are twice as likely as people who bought their last car to get the same brand again.

Consumer Reports' Margot Gilman explains the draw, "The big attraction to leasing is the lower monthly payment. You can drive a pricier car than you may 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 around $350, depending on the terms. Luxury cars are the most likely to be leased. Jaguars, Infinitis, BMWs, Mercedes, Lincolns and Cadillacs top the list. Around a third of the new-car transactions for each of these particular brands are leases.

But Consumer Reports says a lower monthly payment should not be the only consideration when it comes to cost. Gilman cautions, "When you lease you're essentially renting the car long term and 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 leases, you can face extra costs if you terminate the lease early or exceed the mileage, typically around 12,000 to 15,000 miles a year. Gilman says, "Our survey found that the main reasons people decide against leasing is 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."
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