When it comes to cars, leases are ever more popular. The reason why? Well thats no mystery. Thats the only way many people can afford the monthly payments. But which method is the best way to keep more of your money in your pocket?

Lets find out with a simple example. A new car with a sticker price of $27,000. First, lets look at buying. Financing the entire $27,000 at 6.9% interest and you’re payments will be about $821 a month. Times that by 36 months and you’ll pay a total of about $29,556. But after 3 years, you still have a car worth $14,556, so your actual cost is $15,500.

Now look at a typical lease. You put a $1000 down and your total might be $485 a month on a 3 year lease. Times that by 36 months and you’ve paid out $18,460. This is about $3000 more than buying. Now even if you earn interest on the money you’re saving on those lower monthly lease payments, buying is still going to win. The longer you keep you car, the more sense buying usually makes. Using 5 years instead of 3 for example, you 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 money in your pocket buy buying rather than leasing.

Now since there are differences in both cars and deals, you really need to do the math yourself. But don’t worry if the numbers make your eyes glaze over. There are tons of free calculators online that will help you decide.

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This entry was posted on Thursday, May 22nd, 2008 at 10:21 pm and is filed under Loan & Rate Comparisons. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.