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Lease or buy a car - cheapest way to get a vehicle


What is cheaper to buy or lease a car?

Determination which option is better to own the car or use and then give it back.
Even though, everyone agrees that to buy vehicles is the best and cheapest option, but different people have their own values in lives (some things are more important or preferable for one person than the other). There is no 100 % right or wrong choice and people should value their own needs, values, and preferences in order to make any decision if not the best possible, but at least the one that they can live with. Therefore, only your particular situations will lead you to the answer which will benefit you the most.

To own or use and then return the car?

When it comes to lease or buy a car it is even harder to figure out what is the better option because no one has a crystal ball to predict our future. Time value of money should be taken into account first of all (the dollar today won’t worth the same tomorrow). Sometimes your decision might come to the point when you have to decide not what more beneficial to you is, but where you will lose less money.
Usually very small percentage of buyers can afford to purchase a vehicle for cash. However, you need to drive now and not when you will have money. That’s why majority of car shoppers need financing (borrowing money from the bank or credit union) to acquire the desired auto or lease it.


Leasing a vehicle

Lease will work for drivers who need a car for relatively short period of time or they are not sure what might happen in the future. For example, some newer and better model will be offered on the market. Some people like to upgrade their autos often and don’t have time or wish to deal with selling the old one. It is especially reasonable to do if you plan to drive a very expensive luxury car and don’t have enough money to purchase it then the lease will be just right option for you. In addition, usually monthly payments on lease are lower. However, the drawback of it is that leasing is all the time will be more expensive overall for you compare to buying any asset. In addition, some limits might be an issue, such as miles or use (wear). You can negotiate those limitations, but then your payments will most likely be increased.

Buying a car

On the other hand, if you plan to use the vehicle by the time it completely wears out then the best choice to purchase it. From time to time 0% financing can be offered for well qualified customers and if you are lucky one than it might be the best deal. However, most people are not qualified and need to pay the vehicle price (principal) plus some percentage to the financing company which makes your car few thousand more expensive over time. The longer you finance your purchase the more money it will cost you. Therefore, it is wise to think ahead and start to put aside some money for your next car few years earlier the acquisition. It won’t hurt you to open an additional savings account and debit there some amount of money every month as if you would to pay off your loan. Then in a few years you will have good down payment if not the amount needed for the desired vehicle.

Compare lease with finance or cash purchase

Before making any decision not only calculate car payments per month, but compare what lease or buy will cost you over different periods of time.

Cash purchase
Low interest financing
Leasing vehicle
Loan amount
Car price
Annual interest rate
Residual value
Loan period (years)
Term of lease
Number of payments per year
Number of payments per year
Payment (per period)
$437 / month
Payment (per period)
$359.55 / month
Number of payments
Principal Payments
Depreciation fee
Total interest paid
Finance fee
Total interest
Total amount

With a cash purchase or finance option a customer will own the car. After lease term expired the vehicle goes to a dealer. From calculation were excluded title and registration fees. A local tax wasn’t included as well. Dealer or financial institution might charge other fees associated with vehicle finance or lease. Lease terms might vary from 12 to 60 months. Normally with a lease option miles driven per year will be restricted to 12,000, in some cases to 15,000. Residual car value defined by lessor and will vary.
The chart is a general idea for comparison buying vs leasing a vehicle. There are different option might be offered by car dealer as well as interest rates vary depending on customer’s credit history. To reduce the amount of monthly payments whether for financing or leasing the vehicle, you can make a down payment or trade in. For example, you can give to the dealer your old car.