Car Purchase- Leasing vs Buying

Updated on September 12, 2013
J.G. asks from Minneapolis, MN
17 answers

My husband and I have always paid cash for our cars. We went down to one income and don't have enough in savings to be able to purchase another car outright. We bank with a credit union which has very low interest rates for car purchases, but we cannot figure out what the wisest way to purchase a car would be. Do you lease to own or take a loan from the bank and purchase? We don't want anything fancy or new, but he drives long distances so we need a car with good gas mileage. Any thoughts would be appreciated! Thanks.

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answers from Odessa on

Please don't lease. We had to pay for extra miles and depreciation. It was horrible because no bank would lend us the money to pay it off. We had to start all over making payments to buy the car at an inflated price.

2 moms found this helpful


answers from Kansas City on

Don't lease and by a nice used car. Buying brand new is horrible too. It depreciates the minute you drive it off the lot! I will never buy new again!!

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answers from Boca Raton on

We follow Dave Ramsey's strategy on cars . . . no leases (he calls them "fleeces"). You will hear many arguments about why leasing is the way to go, but ultimately the auto finance companies are in the leasing business for a reason (and it's not altruism).

Dave Ramsey would not be in favor of a loan for a car either. If you're driving long distances you are greatly diminishing the value of a car, on top of the depreciation that hits every new car. He would say to limp by on a "beater" car and then continue upgrading (rolling that car into another car) until you are in a car that's relatively new (not brand new) and reliable.

If I were you, and I was desperate, I'd look at a credit union loan for a car that is around two years old but still under warranty (in your shoes I would NOT buy a brand new car and take that depreciation hit). Then scrape together every nickel and dime you can to pay that loan off as fast as possible. I would set a goal to do it within two years.

Most cars are depreciating assets - yet they tie up the income of too many average Americans. We try our best to avoid that trap. We love having NO car payments.

You might want to check out Dave Ramsey's book "The Total Money Makeover" at the library (for free). He also has a website where he streams his daily broadcasts for free.

Good luck.

ETA: Like T.F. we tend to drive our cars forever too. I'm still driving my 2004 Honda Odyssey at 130,000+ miles.

4 moms found this helpful


answers from Seattle on

Leases are only good in two situations:
- you are the type of people who do not drive a lot and always want "the latest" model car. In that case you just pay extra for the luxury of having a brand new model every three years.
- you own a business/are self employed and lease the car for your business, that way the lease is a business expense and can be favorable on your taxes.

Other than that a car lease is always a losing proposition. You have all the responsibilities of owning a car but none of the rights, because technically the car still belongs to the dealership. If there is any damage to the car you're totally screwed and must use the dealership for all repairs and maintenance. If you go over your mileage alotment they charge you an arm and a leg. And in the end you can't even sell the car...

If you take out a loan with a good rate you do end up paying a bit more than if your paid in cash, but the car is yours to do with whatever you want. You can drive as much as you want, you can bring it to any repair shop you trust or do repairs on it yourself if needed.
The best way to purchase a car is to choose one within your budget, put down a decent down payment, keep the loan as short as possible (and make extra payments towards the principal if you can.

0% loans are available through some dealerships as well, but not always the cheapest solution. When we bought a car last we had an option of getting a 0% loan or $1500 cashback. The loan we got through our credit union was $1200 in interest over the length of the loan. You do the math...

In the end it's just being honest to yourself about what you can afford and calculating through all of the offers to find the best one.

Good luck.

3 moms found this helpful


answers from San Diego on

Leases stink and in the end, you lose money (I've had one before and won't go that route again). If I were you, I'd buy a newer model used car and finance it through your credit union.

3 moms found this helpful


answers from Reading on

We leased one time. I hated it. For some people, it's a great option, but for us, we're very hard on our cars and I spent the entire time worrying about every little spot on the carpet and ding in the door. I heard all kinds of horror stories about turning it in at the end. As it was, we ended up buying it out at the end because we really liked the car and it served us well for 8 years. By not buying it outright in the beginning, we did end up spending an additional $1700, but I just did not want another lease. My friend leases and she's meticulous with her car. She leases from Kia and all her maintenance is included (we were with Honda and maintenance was not included, but that was a while ago). I wouldn't lease again, just because I know it doesn't suit our lifestyle.

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answers from Albuquerque on

Leasing is not a good option for you at all. Try to get a loan through the credit union. It's always cheaper to buy from a private party, sometimes a smaller dealer (may want to have it checked by a mechanic in these cases). Check kbb values. Good luck!

2 moms found this helpful


answers from New York on

Leases usually have a fairly low cap on annual mileage so if your husband is driving a lot, it may make a lease an absolutely easy "no" for you. Mileage above the contracted amount is charged by the mile and crazy expensive.

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answers from San Francisco on

As far as I know, leases are only leases. You never own the car.

To me, leases don't make sense and I wouldn't pay that much money for something I was never going to own. There is a reason they push leases so much, and that's because they make the most money on a lease.

If you have good credit, there are plenty of 0% financing offers out there for car purchases, but they only offer 0% for new cars, not used.

Check with your credit union to see what rate they will give you, and if you purchase through a dealer, see what their competing offer will be.

If you buy from an individual rather than a dealer, getting a loan from your credit union will probably be the best way to go about it.

We just bought a new hybrid, and I'm in love. It wasn't cheap, but it will pay for itself in the very long run, and I love not being as dependent on gas.

2 moms found this helpful


answers from Dallas on

Do you keep your cars for a long time or are you the type of customer who likes to get a new car every 3-4 years or so? That can make a difference. Lease cars can add up financially with mileage and any damage whatsoever.

We also pay for our cars outright BUT, we drive them forever.

One option we have used in the past was to take advantage of the bank loan for cash flow purposes BUT have it paid in full within 6 months.

We own all 3 of our cars which are:
07 CLK 350 Mercedes that daughter drives (it was mine first....) but it has less than 40,000 miles on it. It is s sportier model and gets around 20mpg

10 E 350 Mercedes is what hubby drives and has about 75,000 miles on it. He is the sales part of our company and drives a lot. He gets around 20mpg unless he is on the highway and he'll get more.

08 SL550 Mercedes sport convertible is my car with about 35,000 miles and I get a whopping 14-16mpg BUT that is expected for my car because it is a "race car".

We do have to use premium gas exclusively so when the gas prices are skyrocketing, we are paying more.

We love our cars and wouldn't drive anything else unless...HOWEVER, if things got really bad and we had to sell or purchase and could not afford our cars, we would not go into debt. We would more than likely purchase a Honda product. In the past, we've had great experiences with Honda.

One main feature I want in my car is the power to accelerate and get out the way if needed when I am merging, etc. We have horrendous traffic around here and a lot of mean drivers so you have to be proactive in order to get around successfully.

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answers from Milwaukee on

So many of the card dealerships just had 0% financing on everything. Maybe it's still running.

And even though the 0% was on brand new-they were offering 1.9% for the used cars. I'm sure you need good credit scores though.

We just bought a brand new Volkswagon Passat and got the 0% for five years and I know Dodge had that too.

I have never had brand new before and this was my way of talking my hubby into it-0% on top of the warranty-crazy not to if you need it and can afford a new one. It's not the car of my dreams-hubby and I compromised a lot because it will be his car in a few years but it's pretty nice.

Leasing is only good if you don't put a ton of miles on it and plan on ditching it for a new lease in two years or so. You will never own but you will always have a nice newer car.

1 mom found this helpful


answers from Los Angeles on

Don't fleece a car.
Buy a car.

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answers from Pittsburgh on

Don't lease if your husband drives long distances. Most leases have maximum mileage, it's a pretty low limit, and if at the end of the lease you have gone over the mileage limit, you have to pay a LOT.

And in general, with loan rates very low right now, I don't really understand why anyone would lease. You pay the same amount per month for the lease that you would for a loan, and at the end, you don't have a car to sell or trade in.

If you plan to buy a used car - which can be a very good deal - look at the Kelly Blue Book site to get an idea of how much you will pay for different makes and models. It also has reviews of cars, with their features, gas mileage, etc.

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answers from New York on

Do not lease!!!!!!

Leasing is designed for a specific type of customer, basically one who needs to have a new car and someone who drives less than 10,000 miles per year.

Do not fall into the trap of "monthly payments", which is how most dealerships try to sell a car. Be a smart consumer and focus on the total price of the car (the actual cost, fees, and interest you need to pay on a loan).

If you're looking to buy a used car than your best option would be to obtain a loan thru your credit union.



answers from New York on

A lease won't work well for your families lifestyle. A lease in the car world is never to own but just to have a car to ride around in. There are mileage limitations and you are basically taking care of a car that doesn't belong to you. At the end of a lease you can turn the car back in or keep it and will still need to pay money for the car which has nothing to do with the payments you already made.

I agree with others that at this time it would probably be best for you to buy the car through your credit union instead of a lease.



answers from Washington DC on

I prefer to get a good deal and a loan. If the dealer can't give a good price, try a loan through your bank or, better, credit union.

I agree with Andrea that for a family car that you expect to have for many many years, you should not bother with a lease to own. I don't think it would be best in the long run. It's like renting a house vs buying.


answers from Santa Fe on

Leasing is just putting money down into a hole. If you take a loan to buy a car at least you own it after it's paid off and can sell it for some amount. We just bought a 2nd car...a used but very nice 2006 vehicle. It was for sale by the owners here in our town (there is a lot where you can park your car you want to sell). We got an awesome deal but we did have to take out a bank loan. It'll be paid off in 2 years.

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