If you are in the process of getting a new car, you may be thinking about whether it is better to buy it or lease it. There are positive and negative aspects to each. It really comes down to your financial situation, how much you drive and what kind of a driver you are.

When you buy a car, you will own it outright after the loan is paid. You will have an asset that you can sell at anytime. You cannot sell a leased car. In general, your insurance on the car will be less than on a leased vehicle. When you buy a car, you can drive it as much as you want without any restrictions or penalties and you can be as hard on it as you wish.

If you finance your car, your payments will be based on the amount of the loan, the length of the loan and the interest rate. That interest rate is based on your credit score. Your monthly payments will probably be higher than if you leased the car.

The payments on a leased car are lower because you are only paying for part of the car. The payments are based on the principal charge and a finance charge. One of the other benefits of leasing a car is that you get will also probably not need much of a down payment. You also get to drive a newer car that should require fewer repairs over the 3 to 4 years of the lease. At the end of the lease, you either return the car or finance the remaining value of the vehicle. This amount is usually negotiated at the time you enter into the lease agreement. Another good thing about leasing a car is that you won’t get into the situation where you owe more on the vehicle than it is worth. You will also pay less sales tax on your leased car since it is based on the monthly payments rather than the purchase price.

Unfortunately, there are many negatives involved in leasing a car. When you lease a car, you do not own it and you always have a monthly payment. There is no flexibility with a lease. If you have to move away or do not want the car anymore for whatever reason, it is not easy to terminate the lease. You cannot just drop off the car and the keys at the car dealership and just walk away. Usually, it costs six months of payments to get out of a car lease. There is also a mileage restriction that is generally between 12,000 and 15,000 miles per year. If you exceed that mileage, you will have to pay $.15 per mile over that amount. If you lease a luxury car, the excess mileage charge will be $.20 or $.25 per mile. You will also have to pay for any unusual wear and tear or damage on the car at the end of the lease. If you have any minor damage, scratches, ripped upholstery, etc, you will be charged for it.

The bottom line is; if you put a lot of miles on your car, are hard on it, or think you may be moving in the near future leasing is definitely not for you.