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When you ask personal finance experts whether it's better to buy new cars online or lease, the majority will tell you to buy. The reasoning is the same they'd tell you buying a home is smarter than renting: you get nothing back from leasing.
But most people don't lease because they're told it's a good or bad financial decision; they do it for the perks. These include short-term ownership, lower monthly payments, and less overall reliability worry. You can drive a new car for 24 to 36 months, turn it in, and get a brand new model for a similar monthly payment.
This allows you to avoid the costs of ownership that typically occur after the first few years, including heavy maintenance and repair costs. For many car owners, this is one of the biggest pain points that leasing allows you to avoid.
Sure, you don’t "own" the car, but depreciation is likely to kill the value of most cars and cost owners thousands to maintain over the course of six or more years. But don't let that discourage you from buying, as proper maintenance and timely repairs can extend the life of your car, making buying a better option.
It's just not for everyone, especially owners of the following types of cars. These are the vehicles you're likely to see better overall deals through leasing instead of financing.
There's nothing like a luxury car. Whether your brand of choice is Lexus, BMW, Audi, or Mercedes-Benz, you can feel the status ooze off of certain cars. So when you're finally ready to step up to some of the best of the best, you're inevitably going to be looking at pretty big numbers. Even with the most entry-level luxury car, your payment after financing is going to be at least $600/month or more with a generous down payment.
Step up to a mid or high-end luxury car and payments skyrocket to $1000 and higher each month through financing. These are expensive cars, so if you want them that's the price you've got to pay.
That is, unless you lease. And if you want to have the ability to upgrade cars every few years, carry a low monthly payment, and not have to worry about lifetime depreciation and maintenance, this is the way to go.
And considering you're looking at luxury cars to begin with, I bet you don't want to be stuck in the same one for five or more years, right? No one looks at an old BMW and turns their head. They save that energy for the new models.
For example, a new 2015 BMW 328i starts around $37,000. That means you're looking at a $616/month payment before any options, fees, down payment, or financing included. That same 328i leased can easily be brought down into the $350/month range with just a few thousand due at signing.
Luxury cars offer some serious saving for those who really want the best of the best, so don't discount leasing just because you've heard buying is the better option. After all, new cars are not an investment. If you just want to pinch pennies, the used car market is for you.
The reasons for leasing luxury cars may make it hard to believe that the same principle also applies to entry-level cars, such as compact hatchbacks and sedans in the less than $20,000 range. But it does still apply.
You might not save as much on your overall monthly payment, but you'll still end up paying a hefty percentage less when comparing financing vs. lease payments. And here's a great example:
The 2015 Chevy Cruze starts around $17,000, which is about average for compact sedans. Before financing fees and any optional extras, that will run you just under $300/month for a 5-year loan. Remember that BMW 328i lease payment of $350/month? Maybe you wouldn't lease that even if you could afford it, but it's still crazy to think that it's only $50 more each month compared to a Cruze finance payment.
Now, what does the Cruze lease look like? It looks great! For around $199 per month and $500 due at signing, you can get the brand new Chevy compact for 24 months. That's even less of a time commitment than you'll see from most luxury cars, meaning you can upgrade to a newer model in less time.
And with the all-new, redesigned Cruze being released in 2016, you won't want to wait too long.
Overall, if you have steady income and need the extra room in your budget, leasing is a great way to relieve stress when shopping for an economy car like the Cruze. You'll be able to save more money each month, worry less about reliability over time, and be able to regularly upgrade to a new model. That sounds like a win-win situation.
Hybrid and electric cars come at a higher cost than your average car and feature more complex engineering. What does that translate to for owners? More problems.
Some may see fewer problems than others, but with electric motors and batteries you could be in for some large repair bills once your factory warranty runs out. But that's actually the least of your concern with these types vehicles.
The biggest problem with hybrid and electric cars? Depreciation. Most of them lose a ton of value in the first few years of ownership. EVs, such as the Nissan Leaf and Mitsubishi i-MiEV are the biggest culprits, while Toyota's Prius hybrid retains more value than most.
By leasing, however, you can skip the depreciation and long-term ownership worries that come with hybrids and electric cars. After all, the technology and innovation surrounding hybrids and Evs is getting better and better with each passing year. So why would you want to be stuck with an outdated model that's chained to a car payment when you can pay less and gain the ability to upgrade regularly?
And the deals are really, really enticing. As of writing this, 2015 models are being pushed to make way for new inventory. Two of the best deals are on the 2015 Chevy Volt and 2015 Nissan Leaf.
The Volt can be had for just $254 a month for 39 months with only $500 due at signing. That type of payment is the same kind you'd see financing a vehicle that only costs $20,000. The 2015 Volt's starting price is $34,345, so you know that payment is really, really low.
The Leaf is only slightly less overall, but you are getting a fully-electric car with a range of 84 miles per charge. You can lease the 2015 model for $199 a month for 36 months with only $2,399 due at signing.
These types of deals can be found for many hybrid and electric models, allowing you to save more by leasing than you ever would by purchasing a vehicle outright.
At the end of the day, this information alone can't tell you whether buying or leasing is right for you. That comes from crunching the numbers, weighing the risks, and making the decision that's best for your unique situation.