Google “leasing vs. buying” and you’ll have a day’s worth of reading material — lots of reasons to lease a new car and lots of reasons not to. Here is a typical infographic. Whatever you read, I’m betting they all miss the core of the issue: There is really just one reason to lease and one reason not to.

Convenience

Zero down car lease ad
Leasing. They sure make it easy.

The reason to lease is convenience. If you lease, you don’t worry about what to do with the vehicle when you no longer want it. You often have no maintenance and few repairs to have done. You often don’t need much cash, sometimes NO cash, up front. And you’re free to lease a different vehicle every few years with a minimum amount of hassle.

Car lease fine print example
Always read the fine print! All of it.

However, there are some inconveniences to leasing as well. With a lease, you are limited in the number of miles a year you can drive — and it could be really inconvenient to constantly worry about whether or not you’re driving too much.

Funny car bumper stickers
Be careful personalizing your leased car, if you’re so inclined.

You won’t be allowed to personalize the vehicle, and you have be careful about wear and tear or you’ll be charged. And, you may not be able to keep the car at the end of the lease term even if you want to.

But that’s not the core reason not to lease.

Car Buy vs. Lease Cost Comparison
Almost $12,000 saved by NOT leasing.

Cost

The reason not to lease is cost. Leasing costs more than buying.  The usual lists of pros and cons give buying some cost advantages and some disadvantages. But that misses the point: Leasing just costs more.

Why? When you buy a car, you pay for the profit to the manufacturer and the car dealer. And if you finance it, you pay the profit to the bank for lending you money and for taking the risk that you won’t pay it back.

When you lease a car, you still pay all the above, but in addition you pay the lessor for two things: the record keeping and administration to keep track of the vehicle and dispose of it after you return it, and the risk they take that the vehicle will be worth less at the end of the lease than what they anticipated. They do the work and take the risk, and you pay for it.

It’s that simple. An additional hungry mouth (the lessor) needs to make a profit when you lease, and you are the one providing the profit.

CHECK OUT:  Fixed Car Prices — Are They Good or Bad?

Exceptions

There are two exceptions.  First is the instance where the vehicle is worth less at the end of the lease than what the lessor built into the calculations. In that case, they took a risk and lost; the “rent” you paid on the vehicle does not cover their actual costs. But the only way you know that is after the fact — you can’t predict when that will happen, and they wouldn’t stay in business for long if they misjudged the market a lot.

The second exception is occasionally when a manufacturer subsidizes a lease but doesn’t subsidize the purchase of the same vehicle.

So unless you get lucky, leasing costs more, and unless the convenience factors outweigh that, you’re better off buying. You can take that to the bank.

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POSTSCRIPT (but important so don’t skip this)

You will undoubtedly see calculations that make leasing look much cheaper than buying — the same vehicle costs $199 per month to lease but $399 per month to buy.

Don’t fall for it.

Always remember to look at it over a longer period, say 10 years. If you leased a car, you’d pay $199 a month for all 10 years, and you might lease 3 or 4 vehicles over that period. If you buy the car, you’ll pay $399 a month until it’s paid off, but then you could trade in that car as a deposit when you buy a new one,  greatly reducing your monthly payment — to less than $199 (whether you end up owning one, two, or more vehicles over the 10 years).

Your total payments over the 10 years are less when buying, especially when you factor in that you’ll still own a vehicle worth thousands of dollars at the end.

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