Which is better: Leasing or Buying?

It's a common question for anyone considering leasing: lease versus buy - which is better?  So what is the answer? 

Lease Versus Buy
The answer is - it depends. It's not possible to simply say that one is always better than the other because the answer depends on the specifics of each individual situation. 

Leases and purchase loans are simply two different methods of automobile financing. Car leasing is not renting as many people seem to think. It's not at all like apartment leasing.

Leasing is a way of financing the use of a vehicle; buying with a loan finances the purchase of a vehicle. Each has its own benefits and drawbacks. 

When making a 'lease or buy' decision you must look not only at financial comparisons but also at your own personal priorities -based on what's important to you. 

Ask Yourself Some Questions
Is having a new vehicle every two or three years with no major repair risks more important than long-term cost? Or are long term cost savings more important than lower monthly payments? Is building some ownership value in your vehicle more important than low up-front costs and little or no down payment?

Is it important to you to pay off your vehicle and be debt-free for a while, even if it means higher monthly payments for the first few years? Or is it more important to update your vehicle every few years to get the latest styling, new technology, and best safety equipment?

So we find out that making a lease-or-buy decision is not quite cut-and-dry. There are trade-offs, pluses and minuses, pros and cons to consider.

Buying and Leasing are Different
When you buy, you pay for the entire cost of a vehicle, regardless of how many miles you drive it or how long you keep it. Monthly payments are higher than for leasing. You typically make a down payment, pay full sales taxes in cash or roll them into your loan, and pay an interest rate determined by your loan company based on your credit score. You make your first payment a month after you sign your contract. Later, you may decide to sell or trade the vehicle for its depreciated resale or trade value, which may be considerably less than the vehicle's original cost.

When you lease, you pay only a portion of a vehicle's cost, which is the part that you "use up" during the time you're driving it. Leasing is a form of financing and is not the same as renting. You have a choice of not making a down payment, you pay sales tax only on your monthly payments (in most states), and you pay a financial rate, called money factor, that is similar to the interest on a loan. You may also be required to pay fees and possibly a security deposit that you don't pay when you buy. You make your first payment at the time you sign your contract - for the month ahead. At lease-end, you may either return the vehicle, or purchase it for its depreciated resale value. You may be charged a lease-end disposition fee, and for any excessive mileage or wear-and-tear