Articles - Archived Money Matters

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Vehicles: Buy or lease?

Deciding whether it's better to buy or lease a vehicle is not just a financial decision, but one of personal preference. And there's no one right answer. To help you decide, ask yourself these questions:

  • Is having a new vehicle every few years, with little risk of major repair costs, more important than long-term costs?
  • Which is more important…long-term cost savings or lower monthly payments?
  • Is it more important to own a vehicle than to have low upfront costs and no down payment?
  • Is it worth it to have higher monthly payments for a few years so you can eventually have ownership and be debt-free for a while?

Once you've answered these questions, the real financial impact depends on how long you plan to hold on to the vehicle.

Short-term (24 months)

The short-term monthly cost of leasing is less than the cost of buying. Monthly lease payments tend to be 30–60 percent lower than loan payments—even if zero percent or low-interest loans are available.

Medium-term (24–36 months)

During this time frame, leasing carries about the same cost as buying, if you are going to sell or trade your vehicle at the end of the loan. Although it may cost a little less to buy due to fewer fees, lower total finance costs, and the assumption that a purchased vehicle will return full market value if it is sold or traded at the end of the loan, the net cost of leasing may be less when you consider sales tax savings.

Long-term (36+ months)

Assuming you keep your purchased vehicle after the loan has been paid off, and drive it for many years to come, then leasing is almost always more than the cost of buying. This is because the cost of buying is spread over a longer term. Regardless of your decision, you need to be sure whatever your monthly payments are, they fit into your budget. Visit www.lgfcu.org/calculators for help with this decision. If you have additional questions, LGFCU's financial planners are always happy to help at 877.367.5428.