To Lease or to Buy that is the Question.
The Answer? It Depends.

A frustrating answer to hear, but a true one none-the-less. Typically, the answer depends on you, the consumer. One is simply not better than the other, just different. When deciding whether to finance or lease a vehicle you must decide about your own personal priorities and what is important to you:

• Do you need a new vehicle every few years?
• Is having a new vehicle every few years, with few repair costs more important than long-term cost?
• Are monthly payments more important than owning a vehicle and having equity?
• Is saving money over a long-term period more important than low monthly payments over a short-term?

These are the most important questions you need to ask yourself before choosing to lease or finance a vehicle.

Buying and Leasing - Apples and Oranges

Although buying and leasing an automobile are different processes, both are simply a means of financing a vehicle.

When you finance (buy) a vehicle, you are purchasing the whole vehicle. The dealer is not interested in how many kilometres the vehicle is driven or its repair costs. In most cases, you are responsible for a down payment, as well as all taxes, delivery charges, any optional equipment or extras you deem necessary, and an interest rate determined by the dealership or a third party. The first payment is then due a month after you receive the vehicle.

When you lease a vehicle the monthly payment is lower than when purchasing a comparable new vehicle: you are only paying for the portion or time of the vehicle that you use up while driving it: its depreciation. Taxes are calculated on the monthly installments rather than up front on the total purchase price and you pay a fee that is similar to the interest rate of a loan.

Consider the following example. The sticker price of a car is $20,000 and its estimated value after two year is $15,000. If you were to purchase the vehicle your cost would be $20,000 + taxes + fees. If you were to lease the vehicle for two years you would pay the difference in price between the two years: the $5,000 ( the vehicle's depreciation) + financing + fees. This is why leasing payments have a lower monthly fee.

To summarize, many drivers find they can afford a more expensive vehicle or manage lower payments if they lease rather than buy. However, at the end of the term you, the consumer does not have any equity in the vehicle.