Leases and loans are simply two different methods of automobile financing. One finances the use of a vehicle; the other finances the purchase of a vehicle. Each has its own benefits and drawbacks.
It's not possible to simply say that one is always better than the other because it depends on your own particular situation and preferences. You must not only look at the financial comparisons but also at your own personal priorities- what's important to you.
BUYING AND LEASING ARE DIFFERENT
Choosing whether to lease or buy is an important decision. You should consider leasing if:
- You'd like to drive a new car every two or three years
- Prefer lower monthly payments
- Drive under 12,000 miles per year
- Want to avoid paying for any major repair work
WHY DO LEASES COST LESS PER MONTH?
As an example, if you lease a car that costs $20,000 that will have an estimated value of $13,000 after 24 months, you pay for the $7000 difference (depreciation), plus finance charges, plus fees.
When you buy, you pay the entire $20,000, plus finance charges, plus fees. This is fundamentally why leasing offers significantly lower monthly payments than buying.