When you consider that month-to-month payments for car leasing generally tend to work out a little more expensive than other common forms of car financing, you might wonder if it’s a worthwhile option, especially since with other forms you’ll own the car once everything’s said and done. Well, as with most questions, science has the answer.
The answer, it turns out, is ‘yes’ but it depends on your circumstances. There are a few key factors that will determine whether leasing is cheaper.
Depreciation
Cars lose their value quickly—some vehicles lose more than 75% or of their value after three years of use, which means that if you buy a car outright you usually can’t recoup a large proportion of that investment, even if you don’t keep the car for long. This varies by vehicle, so see if you can find out how much your desired model will drop in value.
Service Costs
One of the beautiful things about leasing is that, assuming you keep within the mileage you agree with the leasing company when the agreement is made, the cost of the lease includes ongoing maintenance expenses. Before making any purchase, compare the cost for the number of services you’d expect to need in the period you plan to keep the car for.
Time
The initial investment in a car can be justified if you’re willing to make do with the same vehicle for a long time. You’re unlikely to see much of a return by the time you trade it in, but the overall costs will be lower than leasing if you keep the car for over three years. If you always want to get your hands on the latest and greatest, though, buying over leasing is just a way to saddle yourself with a lot of unnecessary expenses.
Insurance
Most of the time this doesn’t make a difference, but if you like to save money by sticking to just third party cover leasing may be more expensive as the leasing company will usually want you to be fully insured so that they can be sure the vehicle will be in good shape at the end of the lease.
