To Buy or Lease Your Next New Car?

Many years ago, when you needed a new car, you bought one. There was no such thing as a private lease. In more recent years, leasing has become a popular option. But it is not for everyone.

“There is a very narrow group of people for which a lease is advantageous,” said Michael Manning, general manager of Jim Manning Dodge, Chrysler, Jeep, Ram in Dinuba. “Leasing is very rigid,” Manning said.

If know you will drive a limited number of miles per year and you like to pay a fixed amount per month, and know that repairs will be taken care of, then a lease could be for you. This is especially true if you like to a new car every few years.

“If you don't fit that narrow window, then leasing is not for you,” Manning said.

Leases are generally offered on luxury cars with a lot of features as opposed to standard models. Most leases are for three years with 30,000 miles covered by the lease. If you drive more miles, it will cost more. And if you have an accident, you and your insurance will have to pay for repairs.

A person's age does not factor into a lease agreement, whether they are twenty or sixty. However, whether the car is for personal use or business use can have some effect on the decision, said Kevin Green, CPA, with the firm M Green & Company.

Everyone should do research on their own to help make an informed decision.

“No one should let a dealer talk them into a lease, (unless they have all of the details and options),” Green said.

“Do some independent study,” he said, adding that whether for personal use or business use, or both, consumers should discuss whether to lease or buy with a financial advisor who is aware of their personal circumstances.

Manning and Green agree that it is important to look at the bottom line, the dollar ratio. A financial calculator on the M. Green & Company website, http://www.mgreencpas.com/financial_tools, provides help with buying vs. leasing a new car. Type in the numbers for the vehicle you are looking at for a comparison.

“It's a number calculation, I think,” Green said.

For some the decision could be more than just dollars, especially if there is little variation in the cost. Manning suggested considering whether you enjoy changing cars every few years, or get attached and generally like to keep the same one for a longer period of time. While you have the option of buying your previously leased vehicle, it generally will cost you more than buying it in the first place.