How to: Lease or Buy?

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Male voiceover - When it comes to cars, leases are ever more popular, the reason why, well that’s no mystery it’s the only way that many people can afford the monthly payments. But which way is really the best to keep more of your money in your pocket? Let’s find out with a simple example- a new car with a sticker price of $27,000 – first we’ll look at buying, financing the entire twenty seven grand at 6.9% and your payments will be eight hundred and twenty nine bucks a month. Times 36 months and you’ll pay a total of about $29,556, but after three years you’ve still got a car worth $14.000 so you’re actual cost is $15,500.

Now look at a typical lease – you put $1,000 down and a three year lease might be $485 a month, total for 36 months $18,460, it’s about $3,000 more than buying. Now even if you earn interest on the money you save with those lower monthly lease payments buying is still going to win. The longer you keep your car, the more sense buying usually makes. Using five years instead of three for example you’ll still come out ahead even more. Bottom line while there are factors that could make a lease a better deal, generally you’ll keep a little more in your pocket buying rather than leasing.

Now since there are differences in both cars and deals you really need to do this math yourself, but don’t worry if numbers make our eyes glaze over, there are tonnes of free calculators online that’ll help you decide. For Money Talks, I’m Stacy Johnson.