Leasing and Financing...

[iMacDrew]

Ive purchased two cars from financing first time at a 10.00% refi to 2.99 then my most recent purchase was 2.59%. Not bad but my main question is.. What options do you have after your lease is up, ive read that you have the option to buy the car after X months. Is it better to lease lets say if you plan on buying the car anyways? what benefits does leasing give you besides wiping your hands clean after so many months? just curious thanks!

[llecs]

Read your contract. It'll spell out what options you have with your vehicle. YMMV on the lender. Some will require a lease for so many years with an otion to buy it at the fair market value. Financing w/out leasing is much, much cheaper. I don't see much benefit to leasing, other than not wanting the car, or facing the possibility of relocating where the car wouldn't be feasible or accessable.

[andre181]

Most leases give you the option of turning in the car at the end of the lease or purchasing the car at the end of the lease. When initially signing the lease, the lease will detail how much the purchase price (usually called the residual value) will be at the end of the lease. 

When turning the car in, you will be charged for damage above and beyond normal wear and tear, and milage above the agreed upon annual milage. So if you are the type of person who drives a lot or who doesn't take really good car of the car, leasing is probably not for you.

Leasing can be beneficial if you are the type of person who wants a new car every 2-4 years. Payments are almost always lower than financing, and in some states (like mine) there is a big tax advantage with leasing since you are not purchasing the car and as a result do not have to pay a lump sum of sales tax vs financing.

Leasing can also be very beneficial if you are a small business owner who plans on using the leased car only for business. The entire lease payment is a tax write off, whereas if you purchase the car, the depreciation is your method of cost recovery.

My mom exclusively leases cars but has decided she will purchase her current car at the end of the lease because of the low residual value. I've done the math for her and she will end up paying about $700 more leasing and then buying than if she had just financed from the beginning. Not terrible, but every car, lease, person will have different circumstances.